2:36Massachusetts Sen. Elizabeth Warren addresses reporters after a vote on Capitol Hill on November 9, 2025 in Washington, DC.Anna Rose Layden/Getty Images
Sen. Elizabeth Warren, a Democrat representing Massachusetts, is working to impede the speculated divestiture of the $1.6 trillion student loan holdings to private firms — urging Education Secretary Linda McMahon and Treasury Secretary Scott Bessent to halt their alleged dialogues concerning a prospective transaction.
"We implore you to promptly end all endeavors to transfer the federal student loan holdings to the private sector," Warren communicated in a bipartisan letter to the secretaries. "Let’s state it clearly: This exchange would serve as a concession to affluent insiders at the expense of working-class debtors and taxpayers," the correspondence articulates, also noting, "It endangers the erosion of debtors’ legally protected rights, and the transaction would probably be unlawful if the liabilities are conveyed at a deficit for taxpayers."
The document — endorsed by over 40 Democratic legislators — was spearheaded by Warren, Vermont Sen. Bernie Sanders, an independent, and Massachusetts Democratic Rep. Ayanna Pressley. It contends that an exchange would deprive debtors of safeguards against exploitative lenders and yield monetary deficits for taxpayers, which would then enrich private entities while damaging individual debtors and their families. By interfering with the student liabilities of more than 40 million U.S. citizens, Warren asserts the Trump administration is posing a supplemental "hit to the gut" to households.
"Regardless of how it’s portrayed, this transaction would be a substantial gift to massive corporations at the detriment of taxpayers and those with student debt," Warren declared in a statement initially procured by ABC News, further stating "It would represent a monumental blunder."
Sen. Elizabeth Warren speaks to reporters following a vote on Capitol Hill on November 9, 2025 in Washington, DC.Anna Rose Layden/Getty Images
Deliberations about a possible transaction involving the private marketplace were initially detailed by Politico the prior month. McMahon has not hinted that private enterprises would secure sections of the student debt holdings, which are accommodated within the agency’s Office of Federal Student Aid (FSA), but she did acknowledge that she is considering the Treasury Department as a viable destination.
During an informal conversation at the Cato Institute the previous summer, McMahon communicated that the Treasury Department may be better positioned to oversee the assets.
"I genuinely believe that a fitting locale for student obligations is within the Department of Treasury," McMahon articulated, also stating "Secretary Bessent and I have been in discussion regarding this."
ABC News has not autonomously affirmed the alleged exchanges between senior officials at the Department of Education and Treasury concerning privatizing student obligations, or enlisting a private consulting organization to gauge the value of the debt holdings to prepare the obligations for a sale, as disclosed by Politico.
Responding to an inquiry from ABC News, Ellen Keast, Department of Education press secretary for higher education, stated, "We are assessing avenues to bolster the fiscal wellness of the approximately $1.7 trillion student debt portfolio to safeguard the advantages of both students and taxpayers."
Nevertheless, Warren's colleague from Massachusetts, Ayanna Pressley, indicated that it is “perilous and unacceptable” for the administration to collaborate with so-termed predatory firms. “We are petitioning the Trump Administration to promptly recant, advocate for borrowers, and prioritize individuals over profits," Pressley conveyed in a statement to ABC News.
Warren initiated her Save Our Schools initiative in April to scrutinize the administration’s endeavors to close the Department of Education, encompassing curtailing FSA and altering the student debt system. More recently, the Department's internal watchdog initiated an investigation into the agency's sensitive student obligation data after Warren and a cluster of Democrats requested a probe into the Department of Government Efficiency's alleged "penetration" of FSA.
Even though no arrangement has yet been formalized, the Department is exploring "supplemental partnerships" with federal entities to assist McMahon in shifting statutory responsibilities, such as special education services, to alternative entities and effectively eliminating her position. The education department under McMahon has already enacted measures to transfer several of its non-statutory duties, including initiating a workforce development alliance with the Department of Labor and transitioning a program committed to educating future generations of farmers to the Department of Agriculture.
Former employees of the Department of Education denounced a possible student obligation divestiture and underscored that it’s an imprudent and unsuccessful maneuver that the initial Trump administration pursued in 2019. James Kvaal, who held prominent roles in the Obama and Biden administrations, communicated to ABC News that his higher education holdings under former President Barack Obama involved relocating several student obligation responsibilities to the Department of Treasury prior to the pilot program’s abandonment.
Treasury Secretary Scott Bessent speaks alongside Donald Trump during a press availability in the Oval Office of the White House on September 05, 2025 in Washington, DC.Kevin Dietsch/Getty Images
"Treasury possessed its own jurisdiction to collect on liabilities and they sought to ascertain if they could more efficiently manage student obligations compared to the Department of Education," Kvaal clarified.
"The determination was negative; they ultimately encountered elevated expenses and accrued diminished revenue for Treasury," he appended.
Melissa Byrne, the founder of We The 45 Million, which advocates for the abatement of student debt for all U.S. citizens, expressed that a prospective divestiture establishes a "catastrophic" circumstance for debtors.
The transition to private entities does not engender a more streamlined, more effective, payment procedure for debtors nor does it secure their protections, according to Byrne.
"What they intend to execute is exacerbate the situation by not solely compromising the quality of servicing, but subsequently eradicating all incentives," Byrne disclosed to ABC News. "In the event that you are trading the loan to the private domain, the private domain will not perceive the debtor as a consumer to whom they should be accountable," she stated.
"Who will even be held accountable [for the loans]?" she further inquired. "It will be the debtor and their families who become disoriented amidst this entanglement."
Sourse: abcnews.go.com
