Experts question whether the U.S. Department of Treasury is equipped to handle borrower inquiries, as the Trump administration moves defaulted loan portfolio to the agency.
Brief:
The U.S. Department of Education has signed an interagency agreement with the U.S. Department of the Treasury to transfer roughly $180 billion of the agency’s student loan portfolio, or 11%, to the Treasury Department.
Under the new agreement, the Treasury Department will now manage all of the loans that are in default. This is the first of a three-phased plan to move the entire student loan portfolio out of ED.
U.S. President Donald Trump has previously blamed the Department of Education for the country’s lagging academic performance, the Associated Press reports.
This latest move marks the largest action toward the Trump Administration’s goal of shutting down the Department of Education, which the president ordered done in an executive order March 20, 2025. Already, the administration has made moves to transfer grant portfolios to other agencies, including the Department of Labor, and moved critical funding and student service support functions to the departments of Labor, State, Interior, and Health and Human Services.
Many experts are expecting the moves to be challenged in court. In an interview with The EDU Ledger, Roxanne Garza, director of higher education policy at EdTrust, said, “When this news first came out, when the Trump Admin first came into power, most people said the administration doesn’t have the authority to shut down the Department of Education, and there are laws in place that give the specific authority over these programs and these funding streams.” Only Congress has the authority to dismantle ED, she pointed out, calling the administration’s use of Interagency Agreements illegal tactics to circumvent congressional authority.
“This convoluted messaging around shifting certain programs to the Department of Labor, or, in this case, Treasury, where they claim they are retaining certain responsibilities [while] shipping off staff” not only makes for a messy process for consumers, it leaves a lot of questions about how well students will actually be served by federal staffers who are not equipped to answer their questions, Garza added.
“How is this more efficient? It almost seems more complicated, you have several teams, in this case two agencies or multiple agencies overseeing programs or funding streams or grants and it’s not clear who exactly is doing what,” she said.
Dr. Devon Graves, an assistant professor of community college leadership at North Carolina State University, said, “We're missing the point when it comes to making the reforms that are necessary. Congress did a great job with the FAFSA simplification act, there are some things like making adjustments to eligibility that are important, but on the other side, when students are trying to figure out how to get the aid they qualified for” and trying to figure out how to address the loans they’ve already taken out, the move “will be an additional barrier that students and borrowers will have to navigate.”
