Private Student Loans Poised for Growth as Trump Repayment Changes Take Effect

Student-loan borrowers are facing a maze of confusing rules as President Donald Trump's repayment overhaul goes into effect on July 1. The changes will limit federal borrowing and are expected to push more students toward private lenders. Private student loans currently make up a relatively small share of the higher-education borrowing market but the industry is positioned for rapid growth.

Business Insider reviewed the past decade of Consumer Financial Protection Bureau complaints and interviewed borrowers, attorneys, lawmakers, and former regulators about oversight of the private student-loan industry. Borrowers described confusion over who owned their debt, missing or conflicting notices, and lawsuits that followed defaults.

While private lenders are subject to federal and state consumer-protection laws, enforcement is fragmented and inconsistent according to the reporting.

Private lenders serve about 10 percent of borrowers yet account for roughly 25 percent of CFPB complaints. The CFPB released a report in January showing it received about 4,500 private student-loan complaints from July 2024 through July 2025, an increase of 33 percent compared to the previous year.

Anna Park, an attorney at the New York Legal Assistance Group, said she has had difficulty obtaining information from lenders even with client authorization. "It's very difficult, even when we reach out with authorization from the law firm, and we know the language to use, and we know which documents to ask for.

Even then, sometimes we come up with nothing," Park said. Julie Margetta Morgan, a former CFPB and Department of Education official, said the industry's growth could leave more borrowers exposed to payment errors, costly litigation, and the consequences of default including ruined credit and wage garnishment.

"There are rules that lenders are supposed to be following," she said.

Private lenders said they are prepared for an expected increase in borrowers. A Sallie Mae spokesperson pointed to significant oversight and standards set by banking regulators and robust consumer protection laws and regulations. A SoFi spokesperson said the company communicates extensively with borrowers so they can successfully manage their finances.

Scott Buchanan, executive director of the Student Loan Servicing Alliance, said private lenders have a business interest in helping borrowers pay off their loans. Default typically occurs after 120 days without payment, at which point a third party takes over collections and borrowers may lose access to their original accounts.

Melinda Laszczynski, 39, discovered where her defaulted account had been transferred when a collections agency requested she pay her full $160,000 balance. In 2024 the CFPB sued and won a settlement from Navient over claims it mishandled borrowers' payments.

Last spring the Trump administration cut staff and deprioritized oversight at the CFPB according to an April internal memo. A spokesperson said the agency's student-loan ombudsman is continuing to fulfill statutory duties.

February a group of Democratic lawmakers led by Sen.

Elizabeth Warren released an analysis on private lenders' plans. The analysis warned that new federal borrowing caps would eliminate competitive pressure on private lenders to keep repayment terms reasonable. Federal interest rates are fixed throughout repayment.

They currently stand at 6.39 percent for direct undergraduate loans compared with variable private student-loan rates ranging from about 3 percent to 18 percent. Nineteen states have enacted what they call a borrower's bill of rights governing lender communications and providing some protections.

Morgan said state attorneys general lack the capacity to monitor the industry in the same way as the CFPB.