Trump hires firm to assess burden of student loan portfolio
Former investment banker Carol Roth on efforts to solve the mounting student debt crisis in America.
The Trump administration is reportedly looking for ways to ease a potential strain on taxpayers that could result from the inability of Americans to repay their student loans in full.
The Department of Education has hired consulting firm McKinsey & Co. to help evaluate its massive $1.45 trillion student loan portfolio, as reported by The Wall Street Journal, citing administration officials familiar with the matter.
A spokesperson for McKinsey & Co. did not immediately return FOX Business’ request for comment.
According to the Journal, a recent uptick in the number of borrowers defaulting on student loan obligations triggered the evaluation. The government is responsible for backing up what students cannot repay – meaning the onus ultimately falls on taxpayers.
The White House is reportedly considering several options to address the problem, including selling a portion of the portfolio – thereby allowing the government to raise money upfront and transfer the long-term risks to investors.
The number of people at least 360 days behind on a student loan payment is about 5 million.
About 14 percent of the U.S. population has a student loan. Outstanding student loan debt hit $1.46 trillion at the end of last year, according to data from the Federal Reserve Bank of New York, second only to mortgage debt as a share of Americans’ total debt burdens.
A number of experts and business leaders have cautioned that the government’s role in subsidizing student loans makes it especially risky for the U.S. economy.
Billionaire hedge fund manager Ken Griffin on Tuesday said areas where the government is most heavily involved with subsidizations is “where we often see the economy break down the greatest.”
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JPMorgan CEO Jamie Dimon in January named student loans as a big risk to the U.S. economy, citing a ”lack of discipline” and the fact that student debt is largely owned by the government, not the banking sector.
Meanwhile, lawmakers, too, are attempting to tackle the issue head on. Massachusetts Democrat Elizabeth Warren – a 2020 presidential candidate – recently unveiled a $640 billion proposal to wipe out student debt burdens for some borrowers, and provide at least some relief to about 95 percent of borrowers.