WASHINGTON — The U.S. Treasury Department is set to assume the Department of Education’s role in collecting defaulted federal student loan debt, announced the Trump administration on Thursday. This marks the initial phase in a plan to transfer the entire federal student loan portfolio to Treasury. The Education Department has highlighted its longstanding collaboration with Treasury in managing federal student aid programs.
Trump’s administration aims to dismantle the 46-year-old Education Department, advocating a return of education oversight to the states. Despite this, most school oversight and funding already occur at state and local levels. In the initial phase, Treasury will offer operational support to the Education Department’s efforts in helping borrowers resume payments, as per the announcement. The Education Department’s student loan portfolio currently stands at around $1.7 trillion, with less than 40% of borrowers in repayment and nearly a quarter in default.
In subsequent phases, Treasury plans to support non-defaulted federal student loan debt management, as permitted by law. A senior official assured that borrowers making payments should experience no changes, and instead, expect enhanced customer service.
Department forges multiple agreements
U.S. Education Secretary Linda McMahon stated, “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,” on Thursday. The Education Department has secured nine other agreements with various departments, transferring many responsibilities.
In July 2025, the U.S. Supreme Court temporarily approved mass layoffs and a plan to significantly downsize the Education Department. This decision followed a March 2025 executive order directing McMahon to close her department.
‘Irresponsible, reckless’
Sen. Patty Murray criticized Secretary McMahon for focusing on dismantling her department instead of aiding student borrowers, creating unnecessary bureaucracy. Rachel Gittleman, from the American Federation of Government Employees Local 252, condemned the decision as “an insult” to borrowers and taxpayers. She pointed out that since McMahon’s tenure, nearly half of the Federal Student Aid workforce has been dismissed, impacting oversight of the $1.7 trillion student loan portfolio. The GAO report indicated that staffing cuts have hindered the government’s ability to assess student loan servicers.
Aissa Canchola Bañez from Protect Borrowers labeled the move as “irresponsible, reckless,” warning it could exacerbate financial challenges for already struggling American families during a growing affordability crisis.
—
Read More Montana News
