Trump Administration Considers Selling Federal Student Loan Debt, Report Says: Here’s What To Know

Topline

The Trump administration is considering selling parts of its $1.6 trillion portfolio of student loan debt to the private market, according to a new report—an unprecedented move that would build on its efforts to dismantle the Department of Education and curtail the federal student loan program.

President Donald Trump speaks with Secretary of Education Linda McMahon during an executive order signing ceremony in the Roosevelt Room of the White House on July 31, 2025 in Washington, DC. (Photo by Anna Moneymaker/Getty Images)

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Key Facts

Senior officials at the Treasury and Education Departments have discussed the proposal with finance industry executives and are considering possibly hiring an outside firm or bank to analyze the value of the portfolio, Politico reported, citing three unnamed sources familiar with the discussions.

The discussions come as the Trump administration has gotten rid of some borrower protections, including restarting collections on defaulted student loans that were paused during the COVID-19 pandemic, and experts have raised concerns that private lenders might not be as forgiving to borrowers as the federal government.

Private investors likely wouldn’t be willing to pay more than the loans are worth, since their value is tied to abilities the private market doesn’t have, such as unlimited time to collect loans and immunity from lawsuits, experts told Politico.

The federal government has also sought to reduce the size and responsibilities of the Education Department, which currently oversees the student loan portfolio—in signing an executive order to close the agency, Trump said “the Department of Education is not a bank, and it must return bank functions to an entity equipped to serve America’s students.”

The order also instructs the Small Business Administration to take over the federal student loan portfolio, though the transfer would require congressional approval.

The Trump administration didn’t deny that it was considering selling some of the student loan debt portfolio, telling Politico it is “committed to analyzing all aspects of the federal student loan portfolio,” an unnamed senior administration official said, adding “unlike the previous administration, we are focused on ensuring the long-term health of the portfolio for the benefit of both students and taxpayers.”

Chief Critic

“I really don’t see a scenario here where taxpayers come out ahead,” Preston Cooper, a senior fellow at the American Enterprise Institute think tank, told Politico. “I think the most likely scenario is that taxpayers get less than the loans are actually worth.”

What To Watch For

Under the Higher Education Act, the Education Department can only sell federal student loans after consulting with the Treasury Department and only if it would not cost taxpayers money, according to Politico.

Tangent

The Trump administration also considered selling some of its student loan debt to private investors during Trump’s first term and hired McKinsey & Company consulting firm to assess the possibility, multiple outlets reported at the time.

Key Background

The Trump administration has rolled back several Biden-era student loan forgiveness policies. In addition to resuming collections paused during the pandemic, Trump’s “One Big Beautiful Bill Act” lowered caps on graduate school borrowing for lower- and middle-income Americans and eliminated several borrowing programs and implemented new eligibility requirements for the Pell Grant program for low-income students. Economic hardship deferment programs were also eliminated.