Initially, the transition will only apply to about $180 billion in federal student loan defaults. But it could ultimately impact your FAFSA.
White House says shutdown ‘proves’ Department of Education is not needed
Second Linda McMahon announced that the Department of Education would partner with other government agencies to outsource many of its functions.
WASHINGTON – In a move that could have major implications for millions of Americans who rely on financial aid to pay for school, the Trump administration is moving government oversight of federal student loan debt from the Education Department to the Treasury Department.
The two institutions signed a new agreement on March 19th. The deal marks the 10th deal between President Donald Trump and Education Secretary Linda McMahon as they seek to dismantle the department that provides support that students and schools across the country rely on.
The news quickly drew praise from conservatives and questions from advocates for student loan borrowers and college financial aid officers, some of whom were concerned about the short- and long-term implications of the dramatic changes in federal financial aid policy.
Initially, the transfer of “administrative responsibility” will only apply to the debt owed by the more than 9 million Americans who have defaulted on their student loans. But subsequent steps would include further increasing responsibility for managing the government’s roughly $2 trillion in federal student debt and transferring it to the Treasury Department. This includes at least some aspects of managing the Free Application for Federal Student Aid (FAFSA) form, which millions of students use each year to attend college.
The Education Ministry did not provide a specific implementation schedule for the three-phase agreement, but said the first phase, which affects defaults, would begin immediately.
“With the federal student aid portfolio soaring to nearly $1.7 trillion and nearly a quarter of student loan borrowers in default, the American people know that the Department of Education is failing to effectively manage and deliver these critical programs,” McMahon said in a statement. “By leveraging the Treasury Department’s world-renowned expertise in monetary and economic policy, I am confident that after decades of mismanagement, America’s students, borrowers, and taxpayers will finally have a program that works.”
Lawmakers quickly divided on the announcement along party lines. Rep. Tim Walberg, the Republican chairman of the House Education Committee, called it a “sensible and pragmatic step.”
Zachary Schermele is a Congressional reporter for USA TODAY. You can email us at zschermele@usatoday.com. Follow him on X at @ZachSchermele and on Bluesky at @zachschermele.bsky.social..
