Trump Administration Moving Federal Student Loan Portfolio to Treasury Department

The Department of Education is working to offload its more than $1.7 million student-loan-debt portfolio to the Department of the Treasury, part of a President Donald Trump-approved downsizing plan that he and Secretary Linda McMahon hope will lead to the agency’s eventual dissolution.

This is the 10th interagency agreement between the Education Department and other federal agencies, though Thursday’s move is the boldest one thus far. The student loan portfolio makes up two-thirds of the department’s budget, and shifting this major responsibility is one of many steps that McMahon is undertaking to dismantle the agency entirely.

“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,” McMahon said in a statement.

The Education Department said on Thursday that the Treasury Department will now have “operational responsibility for collecting on defaulted Federal student loan debt.”

The Department of Education plans to maintain control over non-defaulted student loan debt, for now, but said that the Treasury would eventually have operational control over the entire debt portfolio. Of the $1.7 trillion in student loan debt the Department of Education is transferring, the press release said that 40% of those borrowers are in repayment and a quarter are in default.

The third phase for the interagency agreement would be the transfer of the Free Application for Federal Student Aid, or FAFSA, that allows students to apply for financial aid. The Treasury currently oversees the data systems that the Department of Education uses to verify borrowers’ income for income-based loan repayment plans. There is not currently a timeline for that transfer to be made.

The AFGE Local 252 union, which represents employees of the Department of Education, is already condemning the agreement between the two agencies.

“The Trump Administration continues to unlawfully dismantle the Education Department by moving programs and offices to other federal agencies despite clear warning from Congress that Education Secretary Linda McMahon lacks the authority to do so,” Rachel Gittleman, the president of AFGE Local 252, said in a statement.

The Heritage Foundation, which has called for the dismantlement of the Department of Education for decades, applauded the decision and said it will “streamline” the process of student loans.

“This is the most significant step that agency officials have taken so far to downsize and ultimately close the Education Department,” policy analysts for the Heritage Foundation said in a statement.