President Trump’s administration has taken significant steps to dismantle the Department of Education, raising big questions about the future of federal student loans for more than 40 million Americans, especially following comments from the president that other government agencies should be responsible for managing student loans. Education Secretary Linda McMahon confirmed this week that nearly half of the department’s employees are being cut, with a total shutdown potentially on the horizon.
Why it matters: Many of our readers work at debt collection agencies, banks, fintechs, and other financial institutions that intersect with student loan servicing. Disruptions in who manages these loans could create operational snags — especially if oversight shifts from the Education Department to agencies with limited experience in student debt, such as the Commerce Department or Small Business Administration (SBA). The Treasury Department, however, may be better positioned to handle loan repayment and collections, given its existing role in offsetting overdue debts.
The big picture:
- Trump says the Education Department “shouldn’t be handling the loans” and suggests moving them under Treasury, Commerce, or SBA.
- Experts agree that shuttering an entire Cabinet-level agency requires congressional approval, but the administration may attempt a workaround.
- Borrowers already struggle with inaccurate billing, confusing income-driven repayment options, and lengthy wait times for loan forgiveness applications. Transferring management could exacerbate these issues.
What they’re saying:
- Mark Kantrowitz, higher education expert: “Neither Commerce nor SBA has any relevant experience.”
- Andrew Gillen, Cato Institute: “Treasury already has a lot of information that is necessary to implement the student loan programs.”
- Randi Weingarten, American Federation of Teachers: “This callous move will directly impact the 90% of students who attend public schools … We are urging Congress — and the courts — to step in.”
Between the lines: If the Education Department fully closes, many of its responsibilities — such as federal grants and enforcement of anti-discrimination laws — would need new homes.
What’s next: Trump’s plan faces legal, political, and logistical hurdles. While changes won’t alter the core terms and conditions of existing student loans, the transition could create confusion. Financial institutions and debt collectors should monitor congressional negotiations and agency announcements closely, as any reorganization could reverberate through compliance, servicing, and collections processes across the nation.
