Federal student loans will move to Treasury, further shrinking Education Department

"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. 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."

"According to the interagency agreement, the deal's first phase will see Treasury resuming control of collecting on defaulted student loans, an authority it has long held but deferred to the Education Department. A senior Education Department official reported that 9.2 million borrowers were in default as of the beginning of March, with another 2.4 million in late-stage delinquency on their payments."

"The agreement's second phase expands Treasury's management beyond defaulted loans to include servicing much of what's left, even the Education Department's non-defaulted debts, to the extent practicable, following Treasury's assessment of the portfolio and its operations."

The Trump administration announced a three-phase transition moving federal student loan portfolio management from the Education Department to the Treasury Department. Over 40 million borrowers hold federal student loans, with 9.2 million in default and 2.4 million in late-stage delinquency as of March. The first phase restores Treasury's authority to collect on defaulted loans. The second phase expands Treasury's management to include servicing non-defaulted loans following assessment of operations. The third phase would transfer additional key responsibilities. Administration officials argue Treasury's financial expertise will better manage the $1.7 trillion portfolio and improve outcomes for borrowers, students, and taxpayers after decades of Education Department mismanagement.

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