Trump 2024 and the Student Loan Portfolio

The US Department of Education (ED) handles the student loans of about 40 million US citizens, holding on to about $1.6 Trillion in debt--which is considered an asset to the US government.  And ED-FSA (Federal Student Aid) hires tens of thousands of workers, mostly contractors, to service the debt. But that could change in a few years. If Donald Trump is elected President.  

Under President Trump, debtors might expect that their loans to be transferred over to large corporations--at some point--with the sale being used to reduce the federal deficit, and to cut labor at ED. This would aid in the effort to eliminate the US Department of Education, as Trump has promised on the campaign trail.

Selling off the student loan debt portfolio may or may not require approval from anyone outside of the President. At least one study, by McKinsey & Company, has already been conducted regarding this possibility. 

In 2019, the Trump administration hired McKinsey to analyze the $1.5 trillion federal student loan portfolio. This analysis was part of a broader effort to explore options for managing the portfolio, including potentially selling off some of the debt. Results were never published. The analysis was conducted alongside a study by FI Consulting, which focused on the economic value of the portfolio, noting that the valuation could vary depending on future default rates, prepayment rates, and economic conditions.

The new owners of the sold off debt would most likely be big banks and other large companies, both domestic and foreign, that find value in the debt. There would be political and social resistance.  And many questions would need to be answered, in detail.

Would large banks or other large corporations be better stewards of the debt?

Would the bidding be transparent?  

Would consumers be able to challenge loan repayments or ask for forgiveness?  

What would happen to the contracts of the existing debt servicers?  

Will this expand the existing Student Loan Asset-Backed Securities market? 

Related link:

The Student Loan Mess Updated: Debt as a Form of Social Control and Political Action