Trump admin mulls selling parts of $1.6 trillion student loan portfolio to private investors: Report

Officials in the Trump administration are reportedly weighing plans to sell portions of the federal government’s $1.6 trillion student loan portfolio to private investors, Politico reported, citing people familiar with the discussions.

Talks between senior officials from the Education and Treasury departments have focused on selling high-performing segments of the portfolio, which currently covers around 45 million borrowers.

The discussions, involving senior political appointees, reflect a broader push to reduce the federal government’s role in student lending and increase private-sector participation.

Push to shrink federal role

The proposal aligns with Republican efforts to scale back federal lending and shrink the government’s balance sheet.

“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.”

Concerns over borrower protections

Experts warn that privatizing portions of the portfolio could weaken borrower safeguards, which are typically stronger under federal management. It’s also unclear whether Washington would continue to guarantee the loans.

The federal government currently wields greater collection powers—such as garnishing tax refunds and Social Security benefits—than private lenders.

Review and feasibility study

Officials are reportedly considering hiring a consulting firm or bank to evaluate how the private market might value the debt. By law, the Education Department can sell loans after consulting the Treasury Department, but only if it doesn’t cost taxpayers money.

A similar effort during Trump’s first term stalled after consultants found the portfolio was worth less than expected and the Covid-19 pandemic disrupted further plans.

Part of a wider overhaul

The renewed talks come as the administration looks to overhaul the student loan system, including a proposal to shift loan management from the Education Department to the Treasury—part of Trump’s plan to eventually close the department.

The administration has already rolled back Biden-era debt relief measures, restarted collections on defaulted loans for the first time since 2020, and restructured how loan servicers engage with borrowers.

Skepticism remains

Experts say the plan may offer little fiscal benefit. “Private investors wouldn’t be willing to pay more than the loans are worth,” said Preston Cooper, senior fellow at the American Enterprise Institute. “Even if the goal is to shrink the portfolio and ease administrative costs, it likely isn’t worth it.”