The federal student loan system was spared in the Department of Education’s reorganization announced earlier this week, which will shift several key offices to other federal agencies. But Democratic lawmakers are warning that the administration has other plans for federal student loans, and borrowers may soon be at risk of losing critical legal protections if those plans succeed.
In its announcement earlier this week, the Education Department indicated that multiple offices within the department will be transitioned to other federal agencies through new partnership agreements, diminishing its overall operations and furthering President Donald Trump’s goal announced in March to abolish the department entirely. The Office of Federal Student Aid, which manages the federal student loan system, was not included in that announcement and will remain housed at the department, at least for now.
But more than 40 Democratic members of Congress warned this week that the Trump administration may instead try to sell portions of the federal student loan portfolio to private companies in an effort to further break down the Department of Education. A sale of federal student loans could jeopardize borrowers’ access to key repayment, loan forgiveness, and discharge programs, said the lawmakers. Here’s what a selloff could mean for borrowers.
Lawmakers Warn That Selloff of Student Loans Could Jeopardize Legal Protections
In a letter sent on Sunday to Secretary of Education Linda McMahon and Treasury Secretary Scott Bessent, nearly four dozen Democratic lawmakers warned that selling off the Department of Education’s federal student loans to private companies could have devastating consequences for borrowers.
“We write in light of reports of ongoing conversations between the Trump Administration and finance executives about the potential sale of the federal student loan portfolio to the private sector,” wrote the lawmakers, citing to Politico reporting as well as a Fox News report last month that indicated that Treasury Department officials have have run “multiple models” on the potential sale of student loan debt to private industry. “This sale would be a giveaway to wealthy insiders at the expense of working-class borrowers and taxpayers.