President Donald Trump’s student-loan policies are good for business, a major private lender said.
Trump’s “One Big Beautiful Bill” spending legislation, signed into law in July, included sweeping changes to student-loan repayment, including the elimination of a key affordable repayment plan and new caps on graduate borrowing. The changes signal a complicated — and likely more expensive — road ahead for millions of borrowers, and a potential surge of federal borrowers into private lending.
That’s because if borrowers are unable to get their tuition covered under the new federal borrowing caps, private student loans might be their only option for aid. David Yowan, CEO of the private student loan company Navient, said during an earnings call last week that he expects to see more borrowers turn to Navient following Trump’s federal repayment changes.
“Grad PLUS elimination is a substantial and significant expansion of opportunities that we have with graduate students,” Yowan said. The Grad PLUS program, which Trump’s spending bill eliminated, allowed graduate and professional students to borrow up to the full cost of attendance for their programs. The bill also capped federal borrowing for graduate students at $100,000 over a lifetime, along with a $200,000 lifetime cap for professional students, like those in medical or law school.
Yowan added that the August 1 restart of interest charges for borrowers currently on the SAVE plan has led to more federal borrowers seeking to refinance. The SAVE plan, which would have allowed for cheaper monthly payments and a shorter timeline to debt relief, was eliminated in Trump’s bill. Borrowers enrolled in the plan can either switch to a different repayment plan or remain on the plan, with growing interest, until it’s phased out in 2028.
Other private lenders also saw Trump’s policies as opportunities; Anthony Noto, CEO of SoFi, said during the company’s earnings call that the elimination of the Grad and Parent PLUS programs could lead to “further opportunities for in school lending and student loan refinance.”
Here’s what a shift to the private student-loan market could mean for borrowers.
What switching from federal to private student loans means
Private student loans are favorable for some borrowers because they would cover what federal loans might not. For example, the new federal cap on graduate and professional borrowing falls under the average tuition costs for both medical and law school, so if students cannot pay the remaining costs for their programs, turning to private student loans would help.
However, switching from federal to private borrowing comes with risks. Interest rates on federal student loans are fixed, meaning that the rate that is set when a borrower takes out the loan remains at that rate for the loan’s lifetime. Private student loan interest rates, meanwhile, are often variable, meaning the rate can increase or decrease over the loan’s lifetime, and lenders set the rates.
It could leave some borrowers paying interest in the double digits, making it difficult to handle growing balances. Borrowers with private loans also cannot access federal programs, like debt relief through Public Service Loan Forgiveness or federal income-driven repayment plans.
Sen. Elizabeth Warren led some of her Democratic colleagues on Monday in sending a letter to the CEOs of major private lenders requesting information on how they’re preparing for a potential influx of federal borrowers. She has previously scrutinized private lenders over accusations of predatory behavior, like denying borrowers debt relief.
“Student debt places a tremendous burden on borrowers, their families, their communities, and the U.S. economy, driving employment, spending, and housing decisions that have long-lasting negative impacts on borrowers’ financial health,” the lawmakers wrote. “Placing a greater share of student loans into the hands of private lenders threatens to make these problems much worse.”
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