WASHINGTON — In a move that could have major implications for millions of Americans who rely on financial aid to afford school, the Trump administration is attempting to gradually shift government supervision of federal student loan debt to the Treasury Department from the Education Department.
The agencies inked a new agreement on March 19 — the 10th such contract in President Donald Trump and Education Secretary Linda McMahon’s bid to break up a department that provides support that students and schools rely on across the country.
The news immediately prompted praise from conservatives and questions among advocates for student loan borrowers and college financial aid officers, some of whom worried about the short- and long-term impacts of the seismic change in federal financial aid policy.
At first, the transfer of “operational responsibility” will only apply to the debt of the more than 9 million Americans who’ve defaulted on their student loans. But in subsequent phases, it will also include shifting more responsibility to manage all of the government’s nearly $2 trillion in federal student debt to the Treasury Department. That includes at least some aspects of managing the Free Application for Federal Student Aid, or FAFSA form, which is used by millions of students every year to go to college.
The Education Department declined to provide a specific timeline for implementing the three-phase agreement, but said the first phase impacting defaulted debt would begin immediately.
“As the federal student aid portfolio soars to nearly $1.7 trillion and with nearly a quarter of student loan borrowers in default, Americans know that the Department of Education has failed to effectively manage and deliver these critical programs,” McMahon said in a statement. “By leveraging Treasury’s world-renowned expertise in finance and economic policy, we are confident that American students, borrowers, and taxpayers will finally have functioning programs after decades of mismanagement.”
Lawmakers were immediately divided along party lines about the announcement. Rep. Tim Walberg, the Republican chair of the education committee in the House of Representatives, called it a “smart, practical move.” Rep. Bobby Scott, his Democratic counterpart on the panel, denounced the change.
Rachel Gittleman, the president of the union for Education Department workers, warned that previous agreements to outsource aspects of the agency’s work elsewhere within the government have already “sown chaos.”
“This isn’t efficiency,” she said in a statement. “Secretary McMahon is creating confusion, eroding public trust, and harming students and families. This is an insult to the nearly 43 million Americans with federal student loan debt and to the taxpayers who depend on federal oversight to prevent waste, fraud and abuse.”
The student borrower advocacy group Protect Borrowers said it “will cause even more confusion about a student loan system that has been fraught with unprecedented disruptions and instability.”
Zachary Schermele is a congressional reporter for USA TODAY. You can reach him by email at [email protected]. Follow him on X at @ZachSchermele and Bluesky at @zachschermele.bsky.social.
This article originally appeared on USA TODAY: Trump to gradually move student loan debt for millions outside Education Department
Reporting by Zachary Schermele, USA TODAY / USA TODAY
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