Trump Administration Weighs Selling Parts Of $1.6t Federal Student Loan Portfolio

Trump administration officials are exploring options to sell off parts of the federal government's $1.6 trillion student loan portfolio to the private market, according to three people familiar with the matter.

The discussions have taken place among senior Education Department and Treasury Department officials and have focused on selling high-performing portions of the government’s massive portfolio of student debt, which is owed by about 45 million Americans.

Trump administration officials have also discussed the issue with finance industry executives, including potential buyers of the debt. The talks earlier this year briefly involved DOGE officials embedded at the Education Department and elsewhere, but they are being led by senior political appointees, according to the people familiar with the conversations who were granted anonymity to discuss internal deliberations.

The idea reflects an appetite from administration officials to shrink the size of student loan debt on the government’s balance sheet. It aligns with broader Republican efforts to scale back federal student lending and expand private-sector involvement in the economy.

Selling federal student loan debt raises significant logistical and legal concerns, adding new uncertainty for borrowers. Key questions include what happens to borrower protections—typically more generous than in the private market — and whether the government would continue guaranteeing any of the loans. The federal government enjoys more powerful debt-collection abilities — such as garnishing tax returns or Social Security benefits — than do private lenders.

“The Trump administration is committed to analyzing all aspects of the federal student loan portfolio,” a senior administration official told POLITICO. “Unlike the previous administration, we are focused on ensuring the long-term health of the portfolio for the benefit of both students and taxpayers.”

The discussions have advanced to include the possibility of bringing in an outside consulting firm or bank to analyze the student loan programs and assess how the private market would value parts of the portfolio, according to a person familiar with the matter.

Federal law governing student loans allows the Education Department to sell the debt after consulting with the Treasury Department but only if the transaction would not cost taxpayers money. But there is little precedent for doing so.

During President Donald Trump’s first term, the Education Department similarly explored the idea and hired consulting firms to examine the federal student loan portfolio and price some of the loans for a sale. The analysis ultimately showed that the federal student loan portfolio was worth far less than government accountants had projected. But the efforts stalled, especially when the Covid-19 pandemic hit.

Trump administration officials now appear to be returning to the concept in his second term, as the White House examines a potential major overhaul of student loans more broadly. The administration is examining options to transfer management of the loan portfolio, or parts of it, to the Treasury Department and away from the Education Department, which Trump has vowed to close.

Selling off some of the debt to the private market is just one idea amid that broader overhaul of student loans that the administration is pursuing. Trump officials have already moved to reverse nearly all of the Biden-era policies aimed at forgiving student debt or providing more generous repayment options.

The Education Department has also moved to restart collections of defaulted debt for the first time since the pandemic in March 2020. In addition, department officials have sought to standardize how the agency’s cadre of outside loan servicing companies interact with borrowers. The agency plans to hire new companies to collect defaulted student loan debt.

The conversations about potentially selling parts of the portfolio have been ongoing for months. But it's unclear how advanced the discussions are within the administration or precisely which parts of the portfolio might be sold.

Experts caution that any sale comes with potential pitfalls for both taxpayers and borrowers.

Preston Cooper, a senior fellow at the American Enterprise Institute, said selling off student loans was a dubious idea that made little fiscal sense. Private investors, he said, wouldn’t be willing to pay more than the loans are worth. Even if the goal is to shrink the portfolio and ease administrative costs, he said, it likely isn’t worth it.

“I really don't see a scenario here where taxpayers come out ahead,” he said. “I think the most likely scenario is that taxpayers get less than the loans are actually worth.”

Eileen Connor, executive director of the Project on Predatory Student Lending, which has frequently sued the Education Department on behalf of borrowers, said she’s skeptical the administration could strike a deal that benefits both taxpayers and borrowers.

“The only way for it to make economic sense is to structure the deal in a way that really short-changes borrowers,” she said. Much of the value of the federal government’s student debt, she said, comes from powers that private entities don’t enjoy: unlimited time to collect on loans, the ability to garnish Social Security benefits and tax refunds, and broad immunity from lawsuits if the government mishandles borrowers’ debt.

At the same time, Connor said, it’s clear that borrowers have legal protections that can’t be extinguished. “It's important for any potential buyer and for all student loan borrowers to understand that there are certain rights and protections that are part of their loans that can't be written out because of the sale to a private entity,” she said.

Mike Pierce, executive director of Protect Borrowers, a progressive consumer group, said a potential sale of the loans would benefit wealthy investors rather than families struggling with student debt.

“Once again, we see that across the Trump administration when Wall Street's demands run against the financial needs of working people, the bankers get what they want,” he said.