Democratic Sen. Elizabeth Warren called on the Trump administration to scrap its plans to sell the student loan portfolio to private companies, warning of the potential risks and consequences.
Warren also demanded that Education Secretary Linda McMahon and Treasury Secretary Scott Bessent quit their reported talks of a potential sale. In a bicameral letter to the secretaries, the Democratic senator said that the sale would be a "giveaway to wealthy insiders at the expense of working-class borrowers and taxpayers."
Elizabeth Warren Warns of Selling Student Loan Portfolio to Private Companies
The letter added that the potential sale would threaten the loss of borrowers' legally guaranteed protections. Warren argued that the idea would most likely be illegal if the debt were sold at a loss for taxpayers.
The bicameral letter was signed by more than 40 Democratic lawmakers, and was led by Warren, independent Vermont Sen. Bernie Sanders, and Massachusetts Democratic Rep. Ayanna Pressley. It also argued that the sale would leave borrowers unprotected from predatory lenders and result in financial losses for taxpayers, according to ABC News.
Read more: Trump Administration Announces New Wave of Student Loan Forgiveness for Millions of Borrowers
These will, in turn, benefit private companies while only harming individual borrowers and their families. The letter said that, by tampering with the student loans of more than 40 million Americans, the Trump administration is threatening an "extra punch in the gut" to families.
Talks of potentially selling off the student loan portfolio to private companies were originally reported last month. On one hand, McMahon has not suggested that private companies would receive parts of the portfolio, but confirmed that she is looking to have the Treasury Department as a potential landing spot.
The Potential Consequences
The letter argued that because of a previous failed attempt by the current administration to sell the student loan portfolio, it now possesses information that suggests the sale of student loans would not be in the government's fiscal interest, The Hill reported.
The press secretary for higher education at the Education Department, Ellen Keast, answered questions about the reported plans. She said that they are currently evaluating ways to improve the fiscal health of the nearly $1.7 trillion student loan portfolio to "safeguard the interests of both students and taxpayers."
The idea of selling federal student loans to private investors would mark a major shift from how these loans have historically been managed by the government. It also brings to the surface the risk of the loans being sold for less than their full value, which means the government will be forced to cover the shortfall, as per Newsweek.
