President Donald Trump is making big moves on student loans. His administration plans to dismantle the U.S. Department of Education, putting the fate of $1.6 trillion in federal borrowing in question. Millions of borrowers are now wondering what’s next.
System Faces Uncertainty
Only Congress can fully eliminate the Department of Education, but Trump is taking drastic steps to shrink it. Earlier this month, the department cut nearly half its staff, leaving just over 2,100 employees. This downsizing could disrupt key functions, including servicing.
White House press secretary Karoline Leavitt assured reporters that some loan operations would remain. However, Trump has made it clear that he wants a different agency to take over the loans, saying, “That’s not their business.”
Where Could Student Loans Go Next?
Trump has floated several agencies as potential replacements for the Education Department in handling those finances. The Treasury Department is a leading candidate since it already collects unpaid debts through the Treasury Offset Program.
However, Trump has also mentioned the Commerce Department and the Small Business Administration (SBA). Experts, though, argue that neither agency has the experience needed to manage student loans.
Higher education analyst Mark Kantrowitz warned that moving student loan management to an inexperienced agency could create confusion and delays for borrowers.
Student Loan Forgiveness at Risk?
This shake-up comes at a bad time for borrowers. Many are still struggling after Biden’s student loan forgiveness plan was struck down in court. Borrowers in income-driven repayment plans or those seeking loan cancellation due to disability could see major delays.
Kantrowitz noted that loan servicers handle much of the paperwork, but the Education Department gives final approval for forgiveness applications. If the department is gutted, that process could slow down significantly.
Borrowers’ Rights Remain the Same
Despite the uncertainty, student loan terms cannot change without congressional approval. Borrowers’ rights are protected by the promissory notes they signed when taking out their loans.
While the White House has not released detailed plans, the coming months will be crucial for student loan borrowers. If Trump moves forward with eliminating the Department of Education, millions could see major changes in how their loans are handled.
