Trump to Slowly Unleash Millions in Student Loan Debt Out of Department of Education
WASHINGTON — In a month that could have a big impact on millions of Americans who rely on financial aid to pay for school, the Trump administration is trying to gradually shift the government’s oversight of student loan debt from the Treasury Department to the Education Department.
The agencies struck a new deal on March 19 — the 10th such contract under President Donald Trump and Education Secretary Linda McMahon’s request to dismantle the department that provides funding for students and schools nationwide.
The news quickly drew praise from conservatives and questions among student loan advocates and college financial aid officials, some of whom were concerned about the short- and long-term implications of the seismic shift in state financial aid policy.
At first, the “job assignment” transfer will only apply to the debt of the more than 9 million Americans who default on their student loans. But in subsequent phases, it will also include shifting more responsibility for managing all of the state’s nearly $2 billion in student loan debt to the Department of Finance. That includes at least some aspects of managing the Free Application for Federal Student Aid, or FAFSA form, which millions of students use every year to attend college.
The Department of Education declined to give an exact time frame for implementing the three-phase agreement, but said the first phase, which deals with unpaid debt, will begin immediately.
“With the student aid portfolio growing to nearly $1.7 trillion and with nearly a quarter of student loan defaults, the American people know that the Department of Education has failed to effectively manage and deliver these critical programs,” McMahon said in a statement. “Using the Treasury’s world-renowned expertise in finance and economic policy, we are confident that America’s students, borrowers and taxpayers will finally have programs that work after decades of mismanagement.”
Lawmakers were split along party lines over the announcement. Rep. Tim Walberg, the Republican chairman of the House education committee, called it a “smart, effective step.” Rep. Bobby Scott, his Democratic counterpart on the panel, criticized the change.
Rachel Gittleman, president of the Department of Education union, warned that previous agreements to outsource aspects of the agency’s work elsewhere in the government have already “sowed chaos.”
“This is not good practice,” he said in a statement. “Secretary McMahon is creating confusion, eroding public trust, and hurting students and families. This is an insult to the nearly 43 million Americans with student loan debt and to taxpayers who rely on federal oversight to prevent waste, fraud and abuse.”
Student loan advocacy group Protect Borrowers said it would “create more confusion about a student loan system that is fraught with unprecedented disruption and instability.”
Zachary Schermele is a congressional reporter for USA TODAY. You can reach him by email at [email protected]. Follow him on X at @ZachSchermele and Bluesky at @zachschermele.bsky.social.
This article first appeared in USA TODAY: Trump to gradually move student loan debt to millions outside Department of Education
Reporting by Zachary Schermele, USA TODAY / USA TODAY
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