The Trump Administration signaled that it is looking to sell portions of its student loan portfolio to outside investors. The White House has hired McKinsey & Co, a well-known organization that specializes in giving advice to companies and governments, according to the Wall Street Journal.
The consulting firm will help the Department of Education form an accurate estimate of the losses the government could face if repayment rates remain as low as they are now, according to a spokesperson of the agency. Hiring the firm may also serve other goals, like boosting support for initiatives to force schools to curve tuition increases.
Default rates and participation in debt- forgiveness programs have spiked in recent years, which has prompted the administration to consider selling part of the $1.45 trillion student loan portfolio it currently holds.
Partially selling the portfolio to private investors would help the government outsource the long term risk, as well as infuse cash to the program. This money could then be used to subsidize the interest rates of the loans the government does retain.
Liz Hill, a spokesperson for Education Secretary Betsy DeVos, said the Mckinsey study is the “responsible thing to do,” since it will help the department have a clearer understanding of the state of the portfolio.