Show summary Hide summary
Changes to federal student-loan rules this year are shifting borrowers toward private lenders, and a new congressional analysis warns that could leave many students exposed to less oversight and potentially harsher loan terms. Lawmakers say the shift is already under way — and that it raises immediate questions about consumer protections for borrowers.
Sen. Elizabeth Warren and several colleagues published a report this month drawing on responses from six major private lenders — Citizens, College Ave, Navient, Nelnet, Sallie Mae, and SoFi — about how they are responding to alterations in federal policy. Those changes, enacted in the recent spending bill, removed the Grad PLUS program and capped graduate borrowing, shrinking one major source of federal funding for advanced-degree students.
Private lenders expect higher demand
Several lenders told Congress they are preparing to meet increased demand from students who previously relied on federal graduate loans. In broad strokes, the firms described plans to expand lending, adjust product offerings and, in some cases, sell existing loan portfolios.
California targets luxury car tax dodgers using Montana registrations: owners face big fines
Anonymous social app enters Saudi market: can it survive strict censorship?
Reported portfolio figures in the analysis show notable growth in recent years. SoFi’s private student-loan portfolio rose to about $3.8 billion in 2024 from roughly $2.2 billion in 2022. Sallie Mae reported growth to nearly $7 billion in 2024, and College Ave said its outstanding balances increased by about 71% since 2022 to $2.48 billion.
Some firms signaled this momentum will continue. Navient said it intends to “work diligently” to meet additional borrower demand, while Citizens told lawmakers it expects to improve access for borrowers who can no longer use Grad PLUS loans. Nelnet, by contrast, said its private lending scale is currently limited — servicing about 5,100 private borrowers since 2022 — but that it could support customer service if its book grows.
Sales to private equity and oversight concerns
Lawmakers flagged another trend: the transfer of private loans to outside investors, including private equity firms. Selling loans can free capital and shift risk off a lender’s books, but congressional investigators warned such transfers can leave borrowers farther from federal-style protections and under servicers that may prioritize returns.
Examples cited in the report include Navient’s sale of roughly $1.2 billion in loans to investors over the last decade and Sallie Mae’s prior partnership with a private-equity firm. SoFi acknowledged it has sold loans to third-party investors before, while some lenders said they do not currently plan further private-equity transactions.
Warren and her colleagues pointed to past instances where private-equity–owned servicers pursued aggressive collection tactics, arguing that increased transfers heighten the need for stronger safeguards and regulatory scrutiny.
- Growth in private lending: Multiple lenders reported expanding portfolios and preparing to serve borrowers who lose access to federal funds.
- Portfolio sales: Some firms have already sold loans to private investors; lawmakers warn this can reduce borrower protections.
- Borrower relief options: Lenders say they offer forbearance, grace periods and hardship programs, but those vary across companies.
- Oversight gap: Congress expressed concern that reduced federal oversight makes it harder to monitor complaints or abusive practices.
Private lenders responded to questions about servicing delinquent borrowers by pointing to existing relief mechanisms. Sallie Mae noted that repayment stress is typically highest in the first one to two years and described flexible options such as forbearance. SoFi highlighted programs aimed at preventing delinquency, including hardship and disability accommodations.
Yet lawmakers argued those firm-level protections are not a substitute for robust regulatory review. The report emphasized that without federal loans competing for the same borrowers, private lenders have less incentive to match federal loan terms — including interest rates or disability-related relief — that have long served as a baseline for consumer protections.
The analysis also framed the developments against changes in federal enforcement. The report says that recent administrative moves weakened some supervisory capacity, complicating efforts to track complaints and hold bad actors accountable.
Ellen Keast, a spokesperson for the administration’s education team, defended the policy shift as an effort to curb what she described as excessive borrowing that helped drive tuition inflation and left some students overextended. Her statement echoed the broader policy rationale for reducing certain federal lending options.
For borrowers, the immediate implications are concrete: fewer federal choices for graduate funding, a potential increase in private loans with variable protections, and a greater role for private investors in managing student debt. Lawmakers are calling for stronger oversight to ensure growing private-market activity does not erode consumer safeguards as the market adjusts this year.
