Trump Shifts Student Loan Debt From Education to Treasury
AP Photo/Jose Luis Magana,
The Trump administration has transferred a key part of the federal student loan system from the Education Department to the Treasury Department, placing Treasury in charge of collecting defaulted student loan debt effective immediately.
According to reporting by the Washington Post, the change was announced Thursday through an interagency agreement. Under the arrangement, the Treasury Department will assume control of the Default Resolution Group, which oversees collections for nearly six million borrowers who collectively owe more than $120 billion in defaulted federal student loans.
This agreement is the tenth time the administration has used interagency transfers to move significant responsibilities out of the Education Department. President Trump has said he wants to eliminate the department entirely.
Managing federal student aid programs has traditionally been one of the Education Department’s central duties. Administration officials described the shift as the first phase of a broader three-step plan that would eventually move additional student aid functions to the Treasury Department. Those later stages could include oversight of loans that are not in default and responsibility for the federal student aid application process. Officials have not yet provided a timeline for when those additional changes might occur.
Education Secretary Linda McMahon said the department has struggled to properly manage student aid programs. She argued that the Treasury Department is better equipped to oversee collections, noting that it already handles the distribution of federal student loan funds and has the authority to seize tax refunds to recover unpaid debts. The administration pointed out that nearly one quarter of federal student loan borrowers are currently in default.
Democratic lawmakers, unions representing Education Department employees, and student advocacy groups criticized the move. They say shifting the program could create additional confusion for borrowers who are already struggling to repay their loans, particularly those in default.
The change also comes as the government prepares to introduce a new repayment plan and a new process designed to help borrowers exit default, measures included in the One Big Beautiful Bill signed by President Trump in July.
Critics argue that moving the program out of the Education Department reduces the role of officials with specialized expertise in student aid and may conflict with laws that require federal student loan programs to remain within the department. Rachel Gittleman of the American Federation of Government Employees Local 252 said the change could harm borrowers and weaken federal oversight of student loan programs.
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