Private Equity is Buying Student Loan Debt

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Private equity wants to be a bigger player in the student loan market.

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New proposed rules make it so U.S. banks have to set aside more capital to guard against risk.

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As a result, banks have been looking to shed some of their loan portfolio, including student loans, at attractive prices to help transactions close quickly.

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Private equity firms have been active buyers of student loan debt:

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• Carlyle Group and KKR won an auction for a $10 billion student loan book in June
• Carlyle Group bought a $415 million student loan portfolio in January

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Student loan forgiveness efforts could also benefit buyers of private student loans. If the government forgives federal loans, students may find it easier to manage and repay their private loans since they have less total debt.

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So, as banks drop out, private equity steps in.