Dive Brief:
- Over 40 Democratic lawmakers have called on the Trump administration to abandon reported talks about the possibility of selling off a chunk of the federal government’s $1.6 million student loan portfolio to the private market.
- In a Sunday letter to U.S. Education Secretary Linda McMahon and Treasury Secretary Scott Bessent, the federal lawmakers warned transferring student debt ownership to the private sector could strip borrowers of legal protections and violate the law if the loans are sold at a loss to taxpayers.
- “The federal government cannot simply eliminate its legal obligations to borrowers,” the members of Congress said. “Federal law requires that the protections guaranteed in the original terms of a borrower’s loan must be honored even if the Department of Education proceeds with a sale.”
Dive Insight:
The letter from Democrats — signed by U.S. Sens. Elizabeth Warren, Richard Blumenthal and Ron Wyden, among others — follows an October report from Politico about talks in the Trump administration that centered on a partial sale of the government’s student loans.
According to Politico, senior officials in the U.S. departments of Education and Treasury have recently discussed selling high-performing student loan debt to the private sector.
The administration has also broached the possibility with finance executives, among them potential buyers of the loans, and is considering bringing in consultants or banks to review the portfolio, the news outlet reported.
In addition to calling for the Trump administration to cease any talks, the lawmakers requested detailed information on any potential plan and the names of those who have participated in any discussions. The Education and Treasury departments did not respond to requests for comment by publication time on Tuesday.
The Education Department’s Federal Student Aid office oversees the loan portfolio and contracts out servicing to private entities. Student loan receivables represent one of the largest assets on the nation’s balance sheet.
A 1998 law allows the government to sell student loan assets — so long as it is done at no cost to the government — which could be why no such sale has taken place to date. The Sunday letter said the first Trump administration mulled the possibility but never pursued it, pointing to Wall Street Journal reporting that the agency hired the consultancy McKinsey & Co. at the time to review the portfolio..
The Democratic lawmakers and others have argued the no-cost provision means the government could not sell the loans for less than what it would collect if it kept them on the public balance sheet.
In 2024, FSA estimated the net value of the government’s student loan portfolio at about $1.1 trillion. However, a 2025 analysis from the Project on Predatory Student Lending argues this figure “is almost certainly wrong,” based on data and assumptions that “have proven wildly off-base.”
That figure represents the government’s own valuation of the loan portfolio. In the case of a sale, the relevant figure would be the price a private sector buyer would be willing to pay.
The student lending project said the government has several advantages as a lender over private companies, including unlimited time to collect, the ability to withhold federal payments such as tax refunds to offset loan defaults, and immunity from legal liability for loan servicing failures. All of that means student loans are likely worth more to the government than to the private sector, according to PPSL.
Along with a potential loss to taxpayers, the Democratic lawmakers warned of the possible impact to student borrowers from transferring loan assets.
“By selling parts of the federal student loan portfolio, the Trump Administration may seek to unlawfully strip borrowers of their legally guaranteed protections,” they wrote.
The lawmakers pointed to protections such as income-driven repayment, public service loan forgiveness, disability and death discharges, and debt relief for those determined to have been defrauded by predatory colleges.
“Private lenders typically do not guarantee these kinds of borrower rights,” they wrote. “Profits would likely come at the expense of the borrower via fewer protections and less generous benefits. However, the federal government cannot simply eliminate its legal obligations to borrowers.”
PPSL argued in its analysis that removing provisions for borrowers could make the loan portfolio more valuable to private buyers, but those loan provisions in contracts with the federal government represent property protected by the Fifth Amendment.
“Any law stripping repayment rights or other favorable terms from student loan contracts would potentially trigger an obligation to compensate student loan borrowers for the loss of those terms,” the organization said.
