President Trump Ending The Department of Education Might Impact Student Loans

Many Americans wonder what it would mean to abolish the department that manages their debt as the Trump administration prepares for major plans of the Department of Education to oversee a $1.6 trillion portfolio of student loans.

It depends on which policies the Trump administration implements and which will survive legal challenges. But some of the policy plans leaning towards potential approval include moving the government’s student loans portfolio over to the Treasury Department, changing the repayment plans that are available to borrowers and privatizing the entire student loan system.

Borrowers should expect a halt to student debt relief programs implemented and expanded under former President Joe Biden. His efforts resulted in $188.8 billion in student loan forgiveness for 5.3 million borrowers during his presidency. Republicans have derided the efforts as an abuse of executive authority, and some have even argued for clawbacks of some of that relief, according to ABC News.

The relief was concentrated in expansions or grants to loan debt forgiveness programs that already existed, like Public Service Loan Forgiveness and income-driven repayment plans after efforts at wide scale debt relief were halted by Republican-led lawsuits.

Conservatives advocating for dismantling the Department of Education often suggest moving the Office of Federal Student Aid (FSA) to the Treasury Department, where it would continue regular duties of allocating federal loans and recouping them.

The FSA is where people apply for federal student loans, grants, and work-study funds, using the Free Application for Student Aid, or FAFSA, and it’s also the office that manages the repayment process. Some legal experts argue that Trump could continue pushing the limits of executive authority, as he has with other agencies, ultimately leaving it up to the courts to decide.

Right-leaning American Enterprise Institute (AEI) senior fellow and educational policy director Rick Hess says FSA would be a better fit for the Treasury Department because it’s “essentially a mega-bank.”

Hess wrote in a recent AEI post: “It’d make more sense to have it I’ve seen by officials at Treasury who work closely with financial institutions and oversee federal revenue collection.”

Millions of borrowers still haven’t started repaying their loans since the impact of COVID-19 ended. Also, a lawsuit holding up a Biden-era student loan repayment plan, called SAVE, put nearly 8 million borrowers in anxious self-restraint while they await further guidance, according to Persis Yu — deputy executive director and managing counsel of the Student Borrower Protection Center, which advocates for debt relief.

“No transitions in the student loan system have ever gone well, historically, and we have never tried to move the entire portfolio,” Yu said. “Having a huge shift is certainly not going to make things better.”

Click here for more trending news stories with ACHDA.