President Donald Trump signs executive orders in the Oval Office of the White House on January 20, 2025 in Washington, DC. Trump takes office for his second term as the 47th president of the United States.
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President Donald Trump is expected to sign an executive order on Thursday aimed at dismantling the U.S. Department of Education, throwing into question the fate of the agency’s $1.6 trillion federal student loan portfolio.
Only Congress can eliminate the Education Department. But the Trump administration can starve the agency of resources. Earlier this month, the department laid off nearly half of its staffers. The actions leave the department with 2,183 employees, down from 4,133 when Trump took office in January.
What does this all mean for the more than 40 million Americans who hold federal student loans?
“[T]his would create chaos,” said Michele Shepard Zampini, senior director of college affordability at The Institute For College Access & Success, in an interview with CNBC earlier this year.
Karoline Leavitt, the White House press secretary, told reporters on Thursday that she expected some key functions of the Education Department, including federal student loans, to remain at the minimized agency.
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However, Trump told reporters earlier this month that the loan accounts should be overseen by another department.
“I don’t think the Education [Department] should be handling the loans,” Trump said. “That’s not their business.”
Here’s what could be next for borrowers.
Other agenices floated by Trump for student loans
Trump said this month that his administration was looking to task the Treasury Department, Commerce Department or the Small Business Administration with federal student loan management.
Experts say the most logical agency would be the Treasury Department, since it already plays a role in collecting past-due debts from Americans through the Treasury Offset Program.
Meanwhile, “Neither Commerce nor SBA has any relevant experience,” higher education expert Mark Kantrowitz told CNBC this month.
Student loan forgiveness could be at risk
These changes at the Education Department could not come at a worse time for federal student loan borrowers, consumer advocates say.
Court rulings have nixed Biden administration attempts at widespread forgiveness and repayment plans with lower payments, leaving many borrowers confused and saddled with higher costs.
Without the Education Department operating at full capacity, borrowers may now find their applications for existing loan forgiveness programs stalled, Kantrowitz said. Federal student loan borrowers can be eligible for debt cancellation under income-driven repayment plans or if they become disabled, among other reasons.
Student loan servicers handle the paperwork for the relief, but it’s the Education Department that “has final approval of all student loan forgiveness,” Kantrowitz said.
One important thing to keep in mind: The terms and conditions of your federal student loans cannot change even if the agency overseeing them does, experts say. Borrowers’ rights were guaranteed when they signed the master promissory note when their loans were originated.
The White House did not immediately respond to a request for comment.
What worries do you have about your federal student loans with the Education Dept. at risk? If you’re willing to share your experience for an upcoming story, please email annie.nova@nbcuni.com.
