Education Secretary Betsy DeVos said that “in the commercial world, no bank regulator would allow this [student loan] portfolio to be valued at full, face value.” education DeVos hires consultants to examine student loan portfolio

The Trump administration has enlisted several outside consultants to examine the costs of the Education Department’s $1.5 trillion student loan portfolio and has considered options for selling off some of the debt to private investors, according to federal procurement records and department officials.

The Education Department last month hired FI Consulting, an economic consulting firm, to conduct an analysis of the “economic value” of the federal government’s student loan portfolio, according to procurement records.


Selling off parts of the federal student loan portfolio would be at least unusual, if not unprecedented. And it would also face a number of legal and political complications.

The Education Department has for decades had the authority under the Higher Education Act to sell federal student loans after consulting with the Treasury Department and only if the transaction would not cost taxpayers money. Most federal student loan programs operate at a profit to the government, so their sale would likely be booked as a cost to taxpayers, at least under the current accounting rules.

Administration officials were preparing to advise President Donald Trump “with regard to the potential economic impact of impairment to the collectability of outstanding balances” in the federal government’s student loan portfolio, according to the procurement document. Department officials also wrote that the consulting firm was being hired on an “urgent” basis.

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McKinsey & Company has also been hired by the Education Department to analyze the student loan portfolio and make recommendations on how to manage it, officials said. McKinsey for the past two years has also been advising the department on its major overhaul of student loan servicing and other issues.

The Wall Street Journal first reported the news of the McKinsey study on Wednesday. The Journal also reported, citing administration officials, that a potential sale of federal student loans is under consideration by the White House.

Several Education Department officials who were not authorized to speak publicly also told POLITICO this week that the Trump administration had internally discussed and considered selling off parts of the federal student loan portfolio.

The analysis of the student loan portfolio — and discussion of potential sale options — has been led, in part, by A. Wayne Johnson, the chief strategy and transformation officer, according to department officials. The project has also involved Jeff Courtney, a former J.P.Morgan executive whom DeVos hired last year as a consultant for the Office of Federal Student Aid.

Johnson said in 2017 when he was head of the Office of Federal Student Aid that that selling off parts of the federal government’s student loan portfolio was something on the table for discussion. A student loan industry group floated such a proposal shortly after Trump’s election in 2016.

Education Department spokesperson Liz Hill said in an email earlier this week that “selling off the portfolio isn’t what we’re doing.” She added: “There might be some folks who are misinformed or misinterpreting our actions.”

The hiring of consultants to evaluate the costs of the federal student loan portfolio “has nothing to do with selling off the loan portfolio,” Hill said. “It’s about getting a clear understanding of the state of the portfolio, which is the responsible thing to do since we’re charged with overseeing it and it has ballooned to nearly $1.5 trillion.”

DeVos “takes very seriously the fact that the portfolio is $1.5 trillion and growing and she has pulled in outside resources to take a deeper dive into the numbers,” Hill said. She did not respond to requests for further information on Wednesday.

DeVos has previously raised concerns about the amount of outstanding federal student loan debt, describing it as part of a “crisis” in higher education in a speech last fall at her agency’s annual student financial aid conference.

“Only through government accounting is this student loan portfolio counted as anything but an asset embedded with significant risk,” DeVos said. “In the commercial world, no bank regulator would allow this portfolio to be valued at full, face value.”

It’s not clear how the consulting firms will pursue their analysis of the federal student loan portfolio or what data they will be provided.

The Education Department already estimates and calculates the cost to taxpayers of federal student loans on a regular basis according to the accounting rules that are set by Congress. Critics of those accounting standards say they do not properly take into account the full risk to taxpayers of the student loans.

The Congressional Budget Office estimated last year that new student loans disbursed in 2019 would save taxpayers $4.1 billion over the life of the debt. Under fair-value accounting methodology, the CBO said that the same loans are projected to cost taxpayers $16.1 billion.