On October 8, 2025, news broke that the Trump administration is seriously considering a move that could upend the landscape of higher education finance in the United States: selling off a significant portion of the federal government’s $1.6 trillion student loan portfolio to private companies. This idea, which has been percolating within the administration for months, marks a dramatic shift in federal policy and has sparked an immediate and heated debate about its potential consequences for millions of borrowers.
According to Politico and corroborated by USA TODAY and NewsNation, senior officials from both the Education and Treasury Departments have been deeply involved in these discussions. The plan, if carried out, would shrink the federal government’s role in student lending—a role that has expanded over the past several decades—and potentially transfer the management of these loans to private financial institutions. The move is also closely tied to President Trump’s broader effort to dismantle the Department of Education, a campaign promise he has repeatedly emphasized since 2024. In fact, as Politico notes, the administration is exploring shutting down the department altogether, which would involve moving the student loan portfolio to a different government agency, likely the Treasury.
But what does this mean for the 45 million Americans who currently hold federal student loans? For many, the prospect of their debt being managed by a private company raises a host of questions—and anxieties. As USA TODAY reports, while private lenders routinely buy and sell loans like mortgages to free up capital, the shift from federal to private management could have significant implications for borrowers. That’s because federal student loans come with certain protections and benefits—including the ability to pause repayments during times of crisis, as was done during the COVID-19 pandemic for more than three years under President Biden. Private lenders, by contrast, are not required to offer such forbearance options, and their collection practices may be less forgiving.
“Selling off the loans would reduce the ability for future administrations to try to create loan pauses, which may be the main concern that the administration is trying to deal with,” Kent Smetters, head of the Penn Wharton Budget Model, told USA TODAY. The federal government also wields more powerful debt-collection tools than private companies, including the ability to garnish tax refunds and Social Security benefits—powers that private lenders can only exercise after lengthy court proceedings, if at all.
There’s also the question of whether such a sale would be financially viable. Federal law, as cited by both Politico and USA TODAY, allows the Education Department to sell loans, but only if the transaction does not cost taxpayers money. That’s a tall order, given the current state of the loan portfolio. A 2019 analysis by McKinsey found that roughly 45% of loans in the federal portfolio were unlikely to ever be repaid, raising doubts about how much private investors would be willing to pay for them. “It’s a high hurdle for arguing that selling off the loans will not cost taxpayers any money,” Smetters explained.
To address this, the administration has reportedly considered bringing in an outside consulting firm or bank to appraise the value of the student loan programs, as reported by NewsNation. The U.S. Treasury Department is currently conducting a “Restructuring Review” of the federal student loan system, with a final report expected by the end of 2025. If that report recommends a sale or transfer, Congress would need to approve the plan before it could proceed.
The scale of the issue is staggering. According to the Education Department, as of July 2025, 42.3 million borrowers owe $1.67 trillion in student loans. Of those, about 5.3 million were in default—defined as being at least 270 days past due—as of June 2025. Additionally, 29% of borrowers (about 5.4 million people) were at least 90 days behind on their loan payments in July, a figure that has remained stubbornly high since the end of the pandemic-era payment pause. For comparison, only about 12% of borrowers were that far behind in February 2020, before COVID-19 upended the economy.
Borrower advocates have been quick to criticize the administration’s reported plans. Mike Pierce, executive director of Protect Borrowers, issued a sharp rebuke: “Now we know why President Trump and Secretary McMahon are hell-bent on squeezing every last dollar out of families with student debt. 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.”
From a policy perspective, the proposed sale is also seen as a way for the administration to sidestep future efforts to provide relief to borrowers—such as loan forgiveness or payment pauses—by shifting control of the loans away from the federal government. As USA TODAY points out, any law that strips repayment rights or other favorable terms from student loan contracts could trigger a legal obligation to compensate borrowers for the loss of those terms. That could mean a hefty bill for the government, potentially negating any savings from the sale.
The idea of selling off student loans is not entirely new. The first Trump administration explored a similar option in 2019, but ultimately did not move forward. This time, the discussions have gained new momentum, especially in the wake of the passage of the One Big Beautiful Bill Act by Congress over the summer of 2025—a sweeping legislative package that, among other things, aims to overhaul federal student lending.
Still, as of early October, no final decisions have been made. A source familiar with the matter told USA TODAY that while the administration is actively considering the sale, no imminent action is expected. Any move to sell the loans would likely require significant changes to existing law, as well as careful navigation of the legal and financial complexities involved.
For borrowers, the most immediate impact of a sale would likely be a change in where they send their payments. But the long-term implications—potentially fewer protections, more aggressive collection practices, and reduced flexibility in times of hardship—are what worry advocates and experts most. As the debate unfolds, millions of Americans are left wondering what the future holds for their student debt.
Whether this proposal becomes reality or fades away as previous attempts have, the conversation around the federal government’s role in student lending is far from over. The coming months—and the results of the Treasury’s restructuring review—will determine whether the Trump administration’s bold gamble on student loans will reshape the system for generations to come.
