Trump administration transfers federal student loan management to Treasury

President Donald Trump pledged during his 2024 campaign to dismantle the Department of Education, part of a conservative effort to shrink the federal government’s role in education in favor of greater state control.

Late last year, the Education Department announced a new partnership with four other federal departments — Labor, State, Interior, and Health and Human Services — to share or transfer some of the functions it performs.

On Thursday, the Department of Education and the Treasury Department announced an interagency agreement under which the Treasury Department will assume responsibility for collecting delinquent federal student loan debt.

“In subsequent phases, Treasury will work to provide operational support to non-defaulted federal student loan debt to the extent feasible and legally permitted, while also pursuing opportunities to provide operational support to other functions of the Financial Services Administration,” the joint statement said, referring to federal student aid.

Currently, the Department of Education says the student loan portfolio is approaching $1.7 trillion, with less than 40% of borrowers making repayments and nearly 25% in default.

The Department of Education was created by Congress in 1979 to administer college loans, track student achievement and enforce civil rights in schools. It also provides federal funds to help districts with higher proportions of children living in poverty and to assist students with disabilities.

Although the Trump administration would need an act of Congress to formally eliminate the department, Education Secretary Linda McMahon last year announced plans to lay off hundreds of employees as part of the department’s “ultimate mission.”