Though not everyone is happy to welcome Donald Trump as the new president, investors are betting that his administration is going to good news for the private student loan industry, according to Market Watch. Currently, student debt exceeds $1.4 trillion, so there is plenty of money to be made if privatization becomes a reality.
Despite recent lawsuits filed against its sister company Navient, Sallie Mae’s stock prices rose by more than 50 percent in the time between the election and the inauguration. Navient and Nelnet also saw growth – 18 percent and 26 percent, respectively – while Discover saw an increase of about 8 percent.
Experts like Joe DePaulo of College Ave, a private student loan originator, point out that it makes sense that stock prices jumped once Trump was elected, as Republicans typically prefer privatization over federal involvement.
This would be great news for private student loan companies and banks that consolidate student loans—but potentially bad news for borrowers.
Republicans are not expected to raise the lending limits on the federal government. Currently, undergrads who are still dependent on their parents are allowed to borrow up to $31,000 from the government over their college careers. Once they reach that amount, they can then get the rest of their aid through private loans. If those limits are raised, it would mean fewer students would be forced to turn to private loans, which typically have higher interest rates, to pay for their education.
Trump’s win also means that a national free college program will not happen – a large part of Hillary Clinton’s campaign.
Furthermore, the Department of Education is in the process of awarding a new contract for the servicing its student loan portfolio. Now with Trump in office, it’s unknown how long the federal student loan program will even exist.
The overall view is that any changes made by the new administration would be a boon to private lenders. Trump’s nominee for Secretary of Education, Betsy DeVos, is historically supportive of the privatization of the public school system.
Image Copyright Matt Johnson.