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- Trump’s federal student-loan repayment changes could drive more borrowers to private lending.
- Major private lenders said they’re prepared to compete for the new business.
- The influx is expected to begin in July, when new federal borrowing caps go into effect.
Private student-loan lenders have big things in store for federal borrowers.
During earnings calls in late April, the leaders of major private lenders, including Sallie Mae and Navient, said that they’re ready to compete for federal borrowers once President Donald Trump’s sweeping repayment changes take effect in July.
One major change is new caps on borrowing. Trump’s “big beautiful” spending legislation eliminated the Grad PLUS program, which let students borrow the full cost of attendance, and put new borrowing limits on advanced degrees. Private lenders anticipate that federal borrowers will turn to them for additional financing.
“There is certainly a keen interest coming in, just created, because of the elimination of Grad PLUS,” said David Yowan, Navient’s CEO, during the company’s April 29 earnings call. He added that the company is prepared to “surprise and delight” borrowers with its customer service and the flexibility and ease of its loan products.
Sallie Mae’s CEO, Jonathan Witter, also emphasized the opportunity the federal changes are creating. He said during the company’s earnings call last week that while Sallie Mae has a strong foundation to support an influx of federal borrowers, its credit models and marketing channels will need to be expanded “to get after the grad opportunity.”
“We haven’t seen anything that leads us to believe it’s not achievable, but we’re going to continue to soldier away and make sure we put ourselves in the best position we can to win,” Witter said.
The Trump administration has not commented on how the federal changes will affect private lending and said the changes are intended to curb excessive borrowing and encourage schools to lower tuition.
Borrower advocates and Democratic lawmakers have expressed concern that a growth in private lending could harm borrowers due to minimal oversight over the industry.
Some private lenders have already announced new programs to supplement federal financing gaps. One of them, College Ave, announced a new STEM Graduate Loan that would cover the full cost of attendance for graduates pursuing degrees in science, technology, engineering, or math.
It’s intended to provide “a solution to the changing financing needs grad students may now face in fully funding their degree,” College Ave’s press release said.
Have a story to share about student loans? Contact this reporter at asheffey@businessinsider.com.
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