October 14, 2025
Experts warn the proposal could jeopardize borrower protections and reshape the nation’s $1.6 trillion student loan system.
The Trump administration is reportedly considering selling portions of the federal government’s $1.6 trillion student loan portfolio to private investors, a move that experts say could have sweeping consequences for millions of borrowers and taxpayers alike.
According to a recent report by The Guardian, senior officials in the Departments of Education and Treasury have been in discussions about transferring select, high-performing loans from federal control to private financial institutions. The plan, still in its early stages, could fundamentally change how student loans are managed and regulated in the United States.
Daniel Zibel, vice president and chief counsel at the National Student Legal Defense Network, called the idea “complex and unprecedented,” comparing it to a reversal of the 2008 financial crisis, when the government bought privately held loans to stabilize the market.
“The system for student debt is incredibly complicated,” Zibel said, “and for the administration to do this in a way that lives up to the protections that exist in the law for student loan borrowers makes it even more complicated.”
Selling off the loans would likely shift repayment oversight to private companies—raising concerns about accountability and the future of borrower protections. “If you’re talking about unilateral cancellation, like what President Biden had been talking about, the department would certainly lose all authority to tell a private company that they had to cancel a debt,” Zibel added.
Critics argue the proposal aligns with the administration’s push to reduce federal involvement in higher education financing. Mike Pierce, executive director of Protect Borrowers, said, “Once again, we see that across the Trump administration, when Wall Street’s demands run against the financial needs of working people, the banks get what they want.”
Michele Zampini of the Institute for College Access and Success suggested the plan reflects the administration’s broader agenda to dismantle the Department of Education. “You can’t really wind down the department while still having responsibility for this type of loan portfolio,” she said. “It’s driven mostly by a political interest.”
While the law allows the education secretary to work with the treasury to sell loans, Zibel emphasized that such a move must be proven to serve the nation’s best interests without costing taxpayers. For now, experts warn that privatizing the portfolio could undermine access to higher education. “Federal student loans aren’t designed to make a profit,” Zampini said. “They’re meant to make college possible for those who otherwise couldn’t afford it.”
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