Trump's admin confirms that selling federal student loans to private companies is still on the table
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- The Education Department said it has not made a final decision on selling off federal student loans.
- It's the first time the administration has publicly acknowledged that a sale to private companies is under consideration.
- It comes as private lenders prepare for an influx of borrowers amid looming repayment changes.
The future ownership of the federal student-loan portfolio is up in the air.
On Monday, Sen. Elizabeth Warren released a response she received in early February from Undersecretary of Education Nicholas Kent regarding the potential sale of federal student loans to private companies. Kent wrote in his letter that the administration has "met with a variety of stakeholders to discuss ideas to reform the student loan portfolio" with the goal of reducing the $1.7 trillion burden on borrowers.
"The Department has not taken any final actions or made final decisions regarding selling all or part of the student loan portfolio," Kent said. "We continue to explore all viable options to reduce the burden on taxpayers by restoring the health of the portfolio."
This is the first time that the Department of Education has publicly acknowledged any discussions to sell off federal student loans. Politico first reported in October that the administration was discussing selling off federal student loans with finance executives.
While it's unclear when, or if, a sale would occur, Warren and education policy experts have previously expressed concerns about handing student loan servicing over to private companies. Federal student loans tend to offer more generous forgiveness and repayment plans than private lenders, and it's unclear which plans borrowers would have access to should their loans be sold.
"Instead of helping Americans drowning with student loan debt, Trump is thinking up ways to make life worse for borrowers," Warren said in a statement. "If the Trump administration cared about working-class families, it would stop its ridiculous plan to sell out families to Wall Street."
With major changes coming for student-loan repayment, private lenders are gearing up for a big year. Trump's "big beautiful" spending legislation called for new repayment plans and borrowing caps for advanced degrees, and the leaders of major private lenders previously said they're preparing for an influx of borrowers seeking additional financing that the federal system would no longer cover.
Those lenders wrote to Warren and some of her Democratic colleagues that they're equipped to handle the influx, but the lawmakers said they're concerned that "lenders have far less of an incentive to provide borrowers with loans on terms that are commensurate to those of federal loans."
Kent maintained in his letter that the department is committed to improving federal student aid programs and helping borrowers pay back their loans.
"The Department remains focused on helping borrowers return to repayment and escape the albatross of delinquency and default," he wrote.
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