Wyden, Merkley, Colleagues Press Private Student Loan Lenders on Plans for Borrowers After Republicans Slash Access to Federal Loans
Trump’s so-called “Big, Beautiful Bill” paves the way for private lenders to reap massive profits by exploiting borrowers
Washington, D.C. — U.S. Senators Ron Wyden and Jeff Merkley, both D-Ore., said today they have joined Senate colleagues to press major private student loan lenders on their plans to serve the incoming surge of borrowers pushed their way because of the Republicans’ recently passed budget bill.
The legislation, in addition to stripping health insurance and food assistance from millions of Americans, will also hurt families by drastically cutting access to federal student loans, driving families towards more expensive and often predatory private loans to finance higher education.
“Given the private student loan industry’s track record of shamelessly taking advantage of borrowers, we are seeking answers on how you will serve the students and families who will be forced into the private loan market by this new law and be further harmed by the Trump Administration’s moves to decimate protections against exploitative behavior by private lenders,” the lawmakers wrote to Navient, Nelnet, Sallie Mae, and SoFi.
Donald Trump’s so-called “Big, Beautiful Bill,” passed by Republicans in Congress last month despite opposition from every single Democratic member, codified significant cuts to federal student loan access by drastically lowering caps on loan amounts that can be borrowed by graduate students and parents of undergraduate students. The caps are set far below the prices of attending many academic programs, forcing many students and families to turn to private lenders to finance their education.
The bill will also force new borrowers who sign up for income-driven repayment to enroll in the new Repayment Assistance Plan, which will set significantly higher monthly payments for many borrowers — in some cases, by hundreds of dollars more per month. Because of these higher monthly payments, more borrowers may refinance their loans with private lenders, putting borrowers at a greater risk of harm from financially predatory practices.
Private lenders typically have higher interest rates, and the companies that service these loans have a track record of abusive practices such as deceptive billing statements, shady marketing around refinancing and federal student loan forgiveness, false promises around unemployment protections, and more. Private lenders also have a track record of discrimination and predatory lending tactics. Although the private student loan market currently accounts for 8 percent of student loan debt, it represents more than 40 percent of student loan-related complaints submitted to the Consumer Financial Protection Bureau.
“This new approach is an explicit goal of the Trump Administration…and private student loan lenders have made no secret of their appetite to cash in on such an agenda,” the lawmakers wrote.
The shift comes while Trump and Secretary of Education Linda McMahon have worked to dismantle the federal workforce responsible for protecting borrowers. The administration gutted the Department of Education’s office of the Student Loan Ombudsman, responsible for addressing borrower complaints, and decimated the vendor oversight team, which ensures loan servicers abide by consumer protection laws and properly service student loans. The Trump administration has also tried to fire the vast majority of employees at the Consumer Financial Protection Bureau, which protects consumers, including student loan borrowers, from financially exploitative practices.
Over the past decade, private equity firms have also begun buying up legacy student loan portfolios from banks, raising additional concerns about predatory and abusive collection practices and lack of meaningful relief for borrowers.
“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.”
The letter was led by U.S. Senator Elizabeth Warren, D-Mass. In addition to Wyden and Merkley, the letter was also signed by Democratic Leader Chuck Schumer, D-N.Y., U.S. Senators Bernie Sanders, I-Vt., Richard Blumenthal, D-Conn., Mazie Hirono, D-Hawaii, Chris Van Hollen, D-Md., and Edward J. Markey, D-Mass.
Wyden and Merkley have long been strong advocates for student borrowers. In April, Merkley introduced the Savings Opportunity and Affordable Repayment (SOAR) Act, with Wyden cosponsoring, to protect and strengthen federal student loan repayment options. The bill was blocked by Republicans in June. In March, Wyden led his Senate colleagues, including Merkley, in blasting the Trump Administration for abruptly freezing all income-driven student loan repayment programs, leaving Congress and the millions of working class borrowers in the dark. In February, Wyden and Merkley called for an investigation into recent reports that Elon Musk’s Department of Government Efficiency (DOGE) staffers have gained access to federal student loan data, which includes personal information for millions of borrowers.
The full text of the letter is here.
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