(WASHINGTON) — The Trump administration is gearing up for major changes to the Department of Education, which, among its other functions, oversees a $1.6 trillion portfolio of student loans — the third largest source of household debt in the U.S.
Those loans belong to over 44 million Americans, many of whom are wondering what it would mean to abolish the department that manages their debt.
It depends on which policies the Trump administration actually implements — and which survive legal challenges. But some of the policy plans that have been floated include moving the government’s student loan portfolio over to the Treasury Department, changing the repayment plans that are available to borrowers and, in the most extreme possible change, privatizing the entire student loan system.
Above all, borrowers should expect a halt to student debt relief programs implemented and expanded under former President Joe Biden. The former president’s 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 — though that’s considered unlikely.
The relief was concentrated in expansions or fixes to 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.
Moving the student loan system to a new home
Conservatives who advocate for the Department of Education to be dismantled often suggest moving the Office of Federal Student Aid (FSA) to the Treasury Department, where it would continue to carry out the regular duties of doling out federal loans and recouping them.
FSA, which is an office within the Department of Education, 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 have posited that moving FSA into a different government agency would require congressional approval. But Trump could continue pushing the limits of executive authority, as he has with other agencies, to test that hypothesis, ultimately leaving it up to the courts to decide.
Rick Hess, a senior fellow and director focused on education policy at the right-leaning American Enterprise Institute, says FSA would be a better fit for the Treasury Department because it’s “essentially a mega-bank.”
“It’d make more sense to have it overseen by officials at Treasury who work closely with financial institutions and oversee federal revenue collection,” Hess wrote in a recent post.
Hess, in an interview with ABC News, said that he doesn’t predict any impact on student loan borrowers if FSA moved homes — the process would carry on, he said.
“I would be surprised if it’s noticeable in any way compared to anything the borrowers have experienced in the last 4 years,” Hess said, referring to the tumultuousness of the moratorium on payments during the pandemic, the restart, and then the stop-and-start that resulted from lawsuits over Biden’s forgiveness efforts.
That optimistic view would be a deviation from the learned experience of most borrowers, Persis Yu, deputy executive director and managing counsel of the Student Borrower Protection Center, which advocates for debt relief, said.
“No transitions in the student loan system have ever gone well, historically, and we have never tried to move the entire portfolio,” Yu said.
The student loan system is “messy” in its current state, Yu said.
Millions of borrowers still haven’t started repaying their loans since the Covid-era pause ended, and a lawsuit holding up a Biden-era student loan repayment plan, called SAVE, has put nearly 8 million borrowers in forbearance while they await further guidance.
“Having a huge shift is certainly not going to make things better,” she said.
Yu also raised concerns that the Department of Education oversees the loan system with an emphasis on borrower rights, adhering to the Higher Education Act of 1965, while the Treasury Department would do so as a debt collector, which she said could create a “philosophical” difference in how borrowers will be treated.
“I am not here to defend [the Department of Education’s] track record because we’ve obviously had a lot of critiques of their performance in the past,” Yu said. “But this is a move that will in fact hand the portfolio to people even less qualified to run it.”
Changing the ways borrowers repay their loans
There is also a subset of the Republican Party that wants much more significant changes to the student loan system beyond just rehoming offices to make the overall department smaller.
Project 2025, the conservative blueprint of policy ideas written for the Trump administration, calls for privatizing the student loan system entirely and moving all of the government-owned loans to private loan servicers.
Doing so would be a significant change in the way higher education is funded — more than 92% of people relied on federal loans in 2024, rather than private loans, according to the Education Data Initiative, and offloading the $1.6 trillion in federal student loans the government already has — or ceasing to offer loans going forward — would require congressional approval. (Project 2025 acknowledges that privatizing the system may not be “feasible.”)
It also calls for all federal loan repayment plans, of which there are many options, to be consolidated into just one option, and for an end to Public Service Loan Forgiveness, or PSLF, which grants relief to people who work in public service, like nurses and firefighters, after they’ve paid their loans for 10 years.
But the program, first introduced by Republican President George W. Bush in 2007, was authorized by Congress, and would have to be eliminated by Congress, too, which remains unlikely.
Trump could significantly reduce access to the program, though, returning it to its less-effective form during his first term.
The forgiveness plan was massively expanded under Biden, but at one point in Trump’s first term, the Education Department rejected 99% of PSLF applications, a report from the Government Accountability Office found.
When Biden was in office, the number of people who had qualified for PSLF throughout the program’s history rose from 7,000 to over 1 million.
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