Part I: The Federal Landscape – From Forgiveness to Enforcement
After four years of leniency under the Biden administration—marked by paused repayments, sweeping (and largely challenged) forgiveness efforts, and a softening of federal collections—the tide is turning.
With Donald Trump’s re-election in November 2024 and his second term set to begin in earnest, federal student loan policy is poised for a dramatic reversal. And unlike 2017, the new administration comes prepared, with a clear mandate and an urgent fiscal agenda.
Collections Will Resume, and Aggressively
Alt Lending’s Mary Jo, COO, who has been in active discussions with individuals close to the Trump Team, confirms that the administration intends to resume full-scale collections on federal student loans—particularly those that have remained untouched since the original repayment pause in March 2020.
The rationale is twofold. First, the need to reassert fiscal discipline following years of rising federal debt. Second, the view—shared by many in Trump’s team—that the student loan pause has created moral hazard and distorted repayment expectations. Collections, they argue, are not just about recouping funds; they’re about restoring credibility to the system.
Treasury Takeover: From Department of Education to IRS?
One proposal gathering momentum within the Trump camp is a structural realignment: transferring the collection and servicing of federal student loans from the Department of Education to the U.S. Treasury. This would effectively treat unpaid student loans like unpaid tax obligations—making them subject to IRS enforcement mechanisms, including:
- Tax refund interception
- Wage garnishment
- Treasury offsets without judicial review
Though not yet officially announced, this policy shift is being actively discussed, and the messaging is clear: federal student loan repayments will no longer be optional.
This represents a fundamental reprioritisation—and borrowers will respond accordingly.
Garnishments, Seizures, and the Return of Enforcement
The return of hard enforcement tools—particularly wage garnishment and tax intercepts—will put federal loans back at the top of the borrower priority stack. For the millions of Americans who have not made payments on their federal loans for several years, the reintroduction of garnishments will act as a financial shock.
Many borrowers will now face a hard choice: comply with new federal repayment demands or face aggressive collections. That choice will have cascading effects across the entire student debt market.
Part II: The Knock-On Impact on Private Student Loans
Private student loans, which already occupy a subordinated legal and psychological position relative to federal loans, are likely to suffer collateral damage from Trump’s new policy posture.
Federal First: The Borrower Repayment Hierarchy
As federal loans regain their teeth, borrowers will be forced to prioritise them above all else. Unlike federal loans, private student loans:
- Cannot be collected through IRS mechanisms
- Require court action to garnish wages
- Offer less flexibility in hardship or income-driven situations
For distressed borrowers with limited cash flow, the result is predictable: private student loan repayments will be postponed, skipped, or defaulted on, as federal repayments resume and take priority. This shift is not merely behavioural—it’s structural.
Alt Lending anticipates a sharp increase in private student loan defaults and delinquencies, not because of macroeconomic deterioration, but because of enforced repayment on previously dormant federal loans.
Private Defaults and the Restructuring Opportunity
This anticipated rise in defaults will create a surge of distressed private loans—exactly the kind of opportunity that Alt Lending was built to serve.
This cohort of borrowers represents an ideal target for Alt Lending’s restructuring model: highly motivated, financially stressed, but not chronically delinquent. In many cases, they’ll be seeking to refinance to avoid legal action or credit destruction.
Part III: Alt Lending’s Model Poised for Scale
Alt Lending’s business model is built around acquiring, restructuring, and seasoning private student loan portfolios, particularly those that are distressed, delinquent, or in default. The Trump administration’s shift in federal policy will create a vast pool of exactly these assets.
Discounted Acquisitions, Seasoned Performance
Alt Lending typically acquires loans at significant discounts, particularly once they have entered default or show extended delinquency. Loans are then restructured—usually into 10-year terms at ~5% interest, with the addition of co-signers when needed—to make repayments affordable and performance predictable.
After twelve months of successful repayments (seasoning), the loans can be packaged and sold to secondary markets, delivering strong yield profiles and de-risked cash flows.
The expected flood of defaulting private loans in 2025 and beyond—triggered by resumed federal collections—will expand the universe of assets available for acquisition.
Rising Refinance Demand from Borrowers
As private loan borrowers face increased pressure, many will actively seek refinancing solutions. They won’t be looking for traditional loans—they’ll be looking for deals that restructure terms, reduce payments, and help them avoid litigation.
Alt Lending is already preparing for this demand spike by expanding its origination and servicing infrastructure. The firm expects a surge of direct-to-borrower inbound requests from Q2 onwards.
Offloading by Traditional Lenders
Banks and non-bank lenders holding large portfolios of underperforming private student loans may choose to de-risk by selling these assets at a discount. For Alt Lending, this presents a parallel opportunity: institutional bulk acquisitions at low basis cost, with strong upside through restructuring and seasoning.
Mary Jo noted that several regional banks, colleges, and credit unions have already begun exploratory conversations, anticipating a worsening NPL picture in the second half of 2025.
Could Trump Sell Federal Loans to Private Buyers?
A more speculative—but plausible—scenario is that President Trump may authorise the sale of federal student loan portfolios to private firms.
The logic is compelling:
- It reduces the government’s debt exposure
- Generates upfront revenue
- Aligns with conservative principles of reducing government balance sheets
If implemented, such a move would introduce high-volume federal loan paper into the private markets, likely at steep discounts and with structured servicing agreements.
For players like Alt Lending, with the infrastructure to manage, restructure, and service large loan books, this could represent a transformational growth opportunity. Not only would it expand the investible universe—it could shift the firm’s exposure into new credit categories, including partially guaranteed or legacy federal paper.
Conclusion: Repricing, Reprioritisation, and Opportunity
Donald Trump’s re-election has fundamentally changed the outlook for student loans in America. The days of paused payments, forgiveness campaigns, and soft collections are ending. In their place will come enforcement, Treasury oversight, and a hardening of federal collection policy.
For private student loans, this creates a problem—and an opportunity. Defaults will rise. Refinancing demand will spike. Loan books will be repriced and resold.
Alt Lending is positioned at the centre of this realignment. With a model designed for dislocation, a management team fluent in risk pricing, and early access to policy insights, the firm is ready to scale into a rapidly expanding market.
For institutional investors, family offices, and credit-focused placement agents, the coming 12–24 months offer a rare opening to access high-yield private credit, backed by structured risk management, and driven by predictable borrower behaviour.
The market is shifting. The Trump administration is driving the change. And Alt Lending is ready to lead.
Home → Private Markets → The Trump Card: What a Second Term Means for Federal and Private Student Loans
The Trump Card: What a Second Term Means for Federal and Private Student Loans
Ben Rockell
Table of Contents
Key Takeaways
Federal student loan enforcement is returning under Trump, with wage garnishments, tax intercepts, and a potential shift of collections to the U.S. Treasury.
Private student loans will face rising defaults as borrowers prioritise newly enforced federal repayments over private obligations.
Alt Lending is positioned to acquire and restructure distressed private loans, turning borrower dislocation into predictable, high-yield performance.
Traditional lenders are preparing to offload non-performing loan books, creating bulk acquisition opportunities for specialist buyers.
Institutional investors now have a narrow window to access scalable private credit strategies designed for this policy-driven market shift.
Part I: The Federal Landscape – From Forgiveness to Enforcement
After four years of leniency under the Biden administration—marked by paused repayments, sweeping (and largely challenged) forgiveness efforts, and a softening of federal collections—the tide is turning.
With Donald Trump’s re-election in November 2024 and his second term set to begin in earnest, federal student loan policy is poised for a dramatic reversal. And unlike 2017, the new administration comes prepared, with a clear mandate and an urgent fiscal agenda.
Collections Will Resume, and Aggressively
Alt Lending’s Mary Jo, COO, who has been in active discussions with individuals close to the Trump Team, confirms that the administration intends to resume full-scale collections on federal student loans—particularly those that have remained untouched since the original repayment pause in March 2020.
The rationale is twofold. First, the need to reassert fiscal discipline following years of rising federal debt. Second, the view—shared by many in Trump’s team—that the student loan pause has created moral hazard and distorted repayment expectations. Collections, they argue, are not just about recouping funds; they’re about restoring credibility to the system.
Treasury Takeover: From Department of Education to IRS?
One proposal gathering momentum within the Trump camp is a structural realignment: transferring the collection and servicing of federal student loans from the Department of Education to the U.S. Treasury. This would effectively treat unpaid student loans like unpaid tax obligations—making them subject to IRS enforcement mechanisms, including:
Though not yet officially announced, this policy shift is being actively discussed, and the messaging is clear: federal student loan repayments will no longer be optional.
This represents a fundamental reprioritisation—and borrowers will respond accordingly.
Garnishments, Seizures, and the Return of Enforcement
The return of hard enforcement tools—particularly wage garnishment and tax intercepts—will put federal loans back at the top of the borrower priority stack. For the millions of Americans who have not made payments on their federal loans for several years, the reintroduction of garnishments will act as a financial shock.
Many borrowers will now face a hard choice: comply with new federal repayment demands or face aggressive collections. That choice will have cascading effects across the entire student debt market.
Part II: The Knock-On Impact on Private Student Loans
Private student loans, which already occupy a subordinated legal and psychological position relative to federal loans, are likely to suffer collateral damage from Trump’s new policy posture.
Federal First: The Borrower Repayment Hierarchy
As federal loans regain their teeth, borrowers will be forced to prioritise them above all else. Unlike federal loans, private student loans:
For distressed borrowers with limited cash flow, the result is predictable: private student loan repayments will be postponed, skipped, or defaulted on, as federal repayments resume and take priority. This shift is not merely behavioural—it’s structural.
Alt Lending anticipates a sharp increase in private student loan defaults and delinquencies, not because of macroeconomic deterioration, but because of enforced repayment on previously dormant federal loans.
Private Defaults and the Restructuring Opportunity
This anticipated rise in defaults will create a surge of distressed private loans—exactly the kind of opportunity that Alt Lending was built to serve.
This cohort of borrowers represents an ideal target for Alt Lending’s restructuring model: highly motivated, financially stressed, but not chronically delinquent. In many cases, they’ll be seeking to refinance to avoid legal action or credit destruction.
Part III: Alt Lending’s Model Poised for Scale
Alt Lending’s business model is built around acquiring, restructuring, and seasoning private student loan portfolios, particularly those that are distressed, delinquent, or in default. The Trump administration’s shift in federal policy will create a vast pool of exactly these assets.
Discounted Acquisitions, Seasoned Performance
Alt Lending typically acquires loans at significant discounts, particularly once they have entered default or show extended delinquency. Loans are then restructured—usually into 10-year terms at ~5% interest, with the addition of co-signers when needed—to make repayments affordable and performance predictable.
After twelve months of successful repayments (seasoning), the loans can be packaged and sold to secondary markets, delivering strong yield profiles and de-risked cash flows.
The expected flood of defaulting private loans in 2025 and beyond—triggered by resumed federal collections—will expand the universe of assets available for acquisition.
Rising Refinance Demand from Borrowers
As private loan borrowers face increased pressure, many will actively seek refinancing solutions. They won’t be looking for traditional loans—they’ll be looking for deals that restructure terms, reduce payments, and help them avoid litigation.
Alt Lending is already preparing for this demand spike by expanding its origination and servicing infrastructure. The firm expects a surge of direct-to-borrower inbound requests from Q2 onwards.
Offloading by Traditional Lenders
Banks and non-bank lenders holding large portfolios of underperforming private student loans may choose to de-risk by selling these assets at a discount. For Alt Lending, this presents a parallel opportunity: institutional bulk acquisitions at low basis cost, with strong upside through restructuring and seasoning.
Mary Jo noted that several regional banks, colleges, and credit unions have already begun exploratory conversations, anticipating a worsening NPL picture in the second half of 2025.
Could Trump Sell Federal Loans to Private Buyers?
A more speculative—but plausible—scenario is that President Trump may authorise the sale of federal student loan portfolios to private firms.
The logic is compelling:
If implemented, such a move would introduce high-volume federal loan paper into the private markets, likely at steep discounts and with structured servicing agreements.
For players like Alt Lending, with the infrastructure to manage, restructure, and service large loan books, this could represent a transformational growth opportunity. Not only would it expand the investible universe—it could shift the firm’s exposure into new credit categories, including partially guaranteed or legacy federal paper.
Conclusion: Repricing, Reprioritisation, and Opportunity
Donald Trump’s re-election has fundamentally changed the outlook for student loans in America. The days of paused payments, forgiveness campaigns, and soft collections are ending. In their place will come enforcement, Treasury oversight, and a hardening of federal collection policy.
For private student loans, this creates a problem—and an opportunity. Defaults will rise. Refinancing demand will spike. Loan books will be repriced and resold.
Alt Lending is positioned at the centre of this realignment. With a model designed for dislocation, a management team fluent in risk pricing, and early access to policy insights, the firm is ready to scale into a rapidly expanding market.
For institutional investors, family offices, and credit-focused placement agents, the coming 12–24 months offer a rare opening to access high-yield private credit, backed by structured risk management, and driven by predictable borrower behaviour.
The market is shifting. The Trump administration is driving the change. And Alt Lending is ready to lead.
→ Speak to Kingsbury & Partners about private credit opportunities with Alt Lending.
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