Trump admin trying to sell federal student loan debt to private entities: How will it impact borrowers?

Updated on: Oct 08, 2025 06:19 am IST

The US will transfer parts of federal loans to private lenders, affecting some borrowers. Terms stay the same, but federal protections may be lost.

The US government is reportedly considering selling parts of its $1.6 trillion student debt to private lenders, Politico reported on Monday, citing sources in the Trump administration. The sources said that a discussion around it has taken place with the US Department of Education and the US Treasury, but a decision is not imminent.

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The US federal government has a $1.6 trillion portfolio of federal education loans, affecting as many as 35 million Americans. The decision, if and when it happens, would affect many loan holders. However, a significant portion of the loan will still remain with the US government.

How Will It Affect Borrowers? What We Know

The US government’s decision to pass on the loan to private entities will affect some borrowers, but not all. The government is reportedly planning to hand over only parts of the loan to private lenders. Nonetheless, the effects expected from it are minimal.

Transfer of loans from one party to another is a common affair in the financial markets. While the lender changes, the terms and conditions of the loan remain the same, as agreed upon during the initial lending. As a result, the payback schedule as well as the interest rate are going to remain the same.

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However, experts believe that once the loan is handed over to a private entity, some of the protection that the federal government offers will not be available. For instance, during the COVID-19 pandemic, the Biden administration paused student loan payments for 3.5 years amid widespread financial distress.

How Will Borrowers Know If Their Loan Is Moved

Yes, the borrowers will get to know if their loan is handed over to a private player. Though other terms and conditions of the loans will remain the same, payments will now have to be made to a new entity, which will be while making those payments. Beyond that, however, there is likely to be no difference.

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