White House weighing selling off student loans
By: Medora Lee
USA Today
..... If the U.S. government sells your student loan to the private market, would you notice?
.....
That's a question 45 million federal student loan borrowers may be asking. The Trump administration is considering selling part of the federal government's $1.6 trillion student loan portfolio to the private market, a source familiar with the matter confirmed to USA Today.
..... No decisions are imminent, the source said. Politico first reported the potential move.
..... The law allows the federal student loan portfolio to be sold if it doesn't cost taxpayers any money, experts told USA Today. Lenders routinely sell loans like mortgages to banks, mutual funds and other large investors to free up money to issue new loans. Beyond sending a payment to a new company, borrowers usually don't even notice. The original terms of the loan, including the interest rate, monthly payment and loan duration, remain the same.
..... But federal student loans could be different because the U.S. government provides protections that private companies may not, experts said.
.....
For example, 'selling of the loans would reduce the ability for future administrations to try to crate loan pauses, which may be the main concern that the administration is trying to deal with,' said Kent Smetters, head of the nonpartisan research group Penn Wharton Budget Model.
.....
Former President Joe Biden paused student loan repayments for 3 1/2 years due to the COVID-19 pandemic.
.....
It's not the first time a sale has come up in recent years: In 2019, the first Trump administration explored a similar option, the source familiar with recent conversations noted.
..... Trump also hinted at handling over student loans to a different institution in a March [2025] executive order seeking to close the federal Department of Education, one of his signature 2024 campaign promises. A sale could be part of that broad goal.
..... "The (department) is not a bank, and it must return bank functions to an entity equipped to serve America's students," he said at the time.
..... Would this sale be cost-free for taxpayers? Experts say it's not clear. That's because private buyers would likely value the student loan portfolio lower than the governed does.
..... Results from a 2019 analysis by McKinsey consultants to assess the value and credit profile of the Direct Loan portfolio "were not good: an estimated 45% of loans in the portfolio were not expected to ever by repaid," said the Project on Predatory Student Lending, a legal organization that represents student borrowers.
..... Additionally, private companies couldn't be as aggressive in their collections. They can;t garnish wages or other benefits without first going to court, experts noted.
..... Digging deeper, for any sale to occur, terms might have to be altered. Private entities, again, wouldn't be allowed to garnish wages or benefits to help pay back the loan without going to court. They also can't give borrowers unlimited time to repay loans. These - and many other powers -are only given to the federal government, experts said.