The Trump administration is poised to sign an executive order on Thursday that could dismantle the U.S. Department of Education, a move that has significant implications for the management of federal student loans. This development comes as the Education Department oversees an extensive $1.6 trillion federal student loan portfolio. The potential restructuring raises questions about the future oversight of student loans and the department's 2,183 employees, already reduced from 4,133 since President Trump took office.
President Trump has expressed that the Education Department should not be responsible for handling federal student loans. Instead, experts suggest that the Treasury Department is the most logical agency to assume this responsibility. The Treasury Department currently plays a role in collecting past-due debts through the Treasury Offset Program, making it a viable candidate for overseeing student loans.
The Trump administration is considering several agencies for managing federal student loans, including the Treasury Department, Commerce Department, and the Small Business Administration (SBA). However, the Commerce Department and SBA lack experience in this area.
"Neither Commerce nor SBA has any relevant experience," – Mark Kantrowitz
Despite potential changes in oversight, the terms and conditions of federal student loans are expected to remain unchanged. However, concerns arise regarding the processing of loan forgiveness applications. The Education Department currently holds final approval authority for student loan forgiveness programs. With a reduced workforce, borrowers may experience delays in their applications, leading to confusion and higher costs.
Student loan servicers manage the paperwork for loan forgiveness, but the Education Department's role in final approval is crucial. The recent layoffs within the department have left borrowers uncertain about their loan forgiveness outcomes. Additionally, court rulings have blocked attempts by the Biden administration to implement widespread forgiveness and repayment plans with reduced payments, further complicating matters for borrowers.