Banking and Finance Law Daily Wrap Up, LOANS—Senators sound alarm on private student loan lenders, (Feb 3, 2026)

By Sherri M. Schroeder, J.D.

Warren’s investigation into how private student loan lenders will profit from the cuts to federal student loan access underscores “an urgent need for oversight.”

Senators Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee; Democratic Leader Chuck Schumer (D-N.Y.); Bernie Sanders (I-Vt.), Ranking Member of the Senate Health, Education, Labor and Pensions Committee; Richard Blumenthal (D-Conn.); Mazie Hirono (D-Hawaii); Ron Wyden (D-Ore.); Chris Van Hollen (D-Md.); Ed Markey (D-Mass.); and Jeff Merkley (D-Ore.) have issued a report on their investigation into how private student loan lenders expect to profit from the cuts to federal student loan access made by the One Big, Beautiful Bill Act (OBBBA). Signed by President Donald Trump on July 4, 2025, OBBBA sets new caps on federal student loan borrowing, “paving the way for a significant expansion of the private student loan market,” according to the report.

The report, titled “Costly Consequences: How the Trump Administration Unleashed Private Student Loan Lenders,” is the first Congressional analysis of the impacts of OBBBA’s student loan provisions on the private lending market. It is based on information provided by six private student loan lenders—Citizens, College Ave, Navient, Nelnet, Sallie Mae, and SoFi—who were asked to provide details on their policies, lending activity, and future plans related to OBBBA. The lenders were selected “on the basis of their prominence within the private student loan market or ties to federal student loan servicing.” Combined, these companies lent over $14.7 billion in private student loans in 2024, according to the report.

OBBBA. Among other things, OBBBA contains significant cuts to federal student loan access by drastically tightening caps on the amounts that can be borrowed by graduate students and parents of undergraduate students from the federal government. Additionally, OBBBA reduces access to debt cancellation, eliminates financial hardship deferments, and raises borrowers’ monthly payments. As a result, many borrowers will be unable to cover the full cost of their degree programs with federal student loans. Because of this, experts and private lenders expect that more student loan borrowers will turn to private student loans or will be unable to afford graduate school at all because of these changes.

Concerns. “The anticipated expansion of the role of private lending is deeply concerning, since private student loan lenders have a long record of predatory practices that raise costs for borrowers and deprive them of basic consumer protections,” stated the senators. Currently, although the private student loan market accounts for only approximately 8 percent of student loan debt, it represents more than 40 percent of student-loan-related complaints submitted to the Consumer Financial Protection Bureau (CFPB), per the report.

Expansion. According to the report, “Major private lenders have been expanding their lending activity each year, despite persistent predatory behavior in the private student loan market.” Among the five lenders who disclosed how much they have lent to student loan borrowers across multiple years, four of them increased their lending activity from 2022 to 2024. The senators believe that both lawmakers and the public should be concerned by this trend because “private student loan lenders have a record of utilizing abusive practices,” including lying to borrowers about the availability of debt cancellation, autopay discounts, and unemployment protections for borrowers; “making high-rate loans with shoddy underwriting;” and denying access to credit to borrowers from historically marginalized communities.

Opportunity. OBBBA’s cuts and caps to federal student lending are seen as “an opportunity to profit” for the private student loan lenders. However, the report noted that this is “especially concerning given that private lenders will no longer have to compete against federal loans for borrowers who have already met the new graduate loan caps.” Without that competitive pressure, the senators are worried the lenders will have less incentive to provide loans on terms commensurate to those of federal loans and urge careful scrutinization of any new private loan offerings targeted towards graduate students affected by the federal loan caps.

Minimal protections. The report found that most of the private lenders surveyed offer minimal protections for borrowers who are defrauded by their schools or who face a sudden school closure, whereas the federal government is obligated by statute to cancel federal student loans in such cases. From 2021 through 2024, over 1.7 million borrowers’ federal student loans were cancelled through borrower defense and closed school discharge. However, four of the surveyed private lenders did not describe any similar programs, and the report notes that more than 81 percent of the complaints submitted to the CFPB related to private student loan cancellation following school misconduct are against one of the other two surveyed lenders describing similar programs.

Private equity firms. “Half of the private lenders surveyed either have sold student loans to private equity firms or plan to do so in the future,” per the report. Because private equity firms “have a record of anti-consumer and predatory practices,” the senators urge experts to evaluate the extent to which this trend could affect borrowers.

Customer service. The senators note a risk that the service quality of private lenders may decline if their capacity is overwhelmed by the anticipated influx of new student loan borrowers. Most of the surveyed lenders expressed a willingness to expand their customer service capacity if necessary, but they had not yet made any concrete plans to do so. “Private lenders should be held accountable if they fail to adequately expand customer service capacity as promised in the event of increased demand,” wrote the lawmakers.

Conclusion. “The findings of this investigation raise alarm about the impact of OBBBA and the Administration’s broader effort to ‘get out of the student loan business’ and underscore an urgent need for oversight of the private lending market as these companies prepare to cash in on the Administration’s agenda,” the report concluded.

Companies: Citizens; College Ave; Navient; Nelnet; Sallie Mae; SoFi

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