The Trump administration has been considering selling part of the federal government’s $1.6 trillion student loan portfolio to the private market for months, according to three officials familiar with the matter. Under the condition of anonymity, granted by POLITICO, these officials shared that Education and Treasury Department officials have discussed selling off high-performing sections of the portfolio and have raised the idea with finance industry executives, including some potential buyers.

Is this even legal? Under the Higher Education Act of 1965, the Education Department is authorized to sell student loan debt after consulting with the Treasury, as long as the move does not “result in any cost to the Federal Government.”

This approach reflects the Trump administration’s desire to shrink the student loan portfolio on the government’s balance sheet, and builds on its efforts to downsize the Education Department and its role in loan servicing.

This idea was also explored in 2019, during President Trump’s first term. Then-Secretary of Education Betsy DeVos hired consultants to assess the federal student loan portfolio and price some of the loans for sale; however, the analysis revealed that the portfolio was worth less than the government anticipated, stalling efforts. [Forbes, subscription model]

What They’re Saying

Should the Trump administration manage to sell off sections of the student loan portfolio, experts say that it’s unclear what would be in store for taxpayers and the 42 million Americans with student loan debt.

The American Enterprise Institute’s Preston Cooper shared with POLITICO: “I really don’t see a scenario here where taxpayers come out ahead. I think the most likely scenario is that taxpayers get less than the loans are actually worth.”

The Institute for College Access and Success’ (TICAS) Michele Zampini told The Independent that borrowers already face significant changes to repayment, and that this move would “throw the entire system into further chaos.”

What’s Next

The Treasury Department is in the midst of a “Restructuring Review” of the federal student loan portfolio, which is expected to be completed by the end of the year. Should the Treasury recommend a sale or transfer of the debt, Congress will need to approve. [The Hill]