The Trump administration has retained private consultants to estimate potential losses in the U.S. government’s $1.45 trillion student-loan portfolio, and is weighing selling all or portions of the debt to private investors, the Wall Street Journal reported. A potential sale is one of several options the White House is considering to address the student-loan program’s deteriorating finances. The administration’s review has been prompted by a surge in recent years in borrowers’ defaulting on their loans and entering federal debt-forgiveness plans, developments that have severely drained money coming into the government’s coffers. The debt held by the government continues to balloon as interest accrues on existing loans and as new students take out debt to go to school. The Education Department has hired the consulting firm McKinsey & Co. to study how much money could be lost if low repayment rates persist, an agency spokeswoman said. Meantime, President Trump’s top economic advisers in the White House are studying ways to improve the program’s finances, senior administration officials said. One option under early consideration is to sell at least a portion of the portfolio, a plan that has been discussed previously by Republican policy makers but faces many obstacles, including whether the government could find interested investors at the right price. Under such a plan, the government would maintain its role as the nation’s primary lender to college and graduate students, but the government would raise money up front, instead of waiting years for borrowers to make payments, and take the debt off its books. Investors would then assume the long-term risk of the loans. Read more. (Subscription required.)
The issue of student loan debt in bankruptcy is addressed in recommendations of the Final Report of ABI’s Commission on Consumer Bankruptcy. To download a copy of the report, please click here.
