Education Department officials on Thursday announced a plan to gradually transfer the nearly $1.7 trillion student loan portfolio to the Treasury Department — one of the biggest steps taken by the Trump administration to close the education agency.
Transferring the portfolio will happen in three phases through an interagency agreement, which the administration has already used. Transferring education responsibilities to other agencies.
The idea of shifting the entire portfolio has been circulating in conservative policy circles for years.
The initial phase will focus on student loans in default, As first reported by Politico.
Speaking to reporters on Thursday, an Education Department official, speaking on background, said the second phase will focus on student loan debts that are not valid and viable by default, including repayment of such loans.
The third phase will include, among other actions, Treasury’s help in implementing school eligibility for federal student aid programs.
“This is a very well-thought-out, deliberate process that we developed over the course of months to make sure we weren’t breaking anything,” the official said. “I’m not going to attribute specific dates to any of these steps…but today is when we’re starting.”
The official said the change should be “seamless” and borrowers should not notice any difference.
Many lawmakers and conservative policy experts were surprised last spring when President Donald Trump said the entire student loan portfolio would go to the Small Business Administration.
When asked what happened to those plans, the official said Education Secretary Linda McMahon had been “clear” for the past several months that the Treasury was in the best position to take over the student loan portfolio.
The Education Department already works with Treasury on some programs, such as the Free Application for federal student aid, the official said, with the funding agency verifying income information for applicants.
The official did not respond to a question about the costs associated with the interagency agreement.
McMahon said having the Treasury oversee the loans would be better off for student loan borrowers.
“As the federal student aid portfolio grows to nearly $1.7 trillion and nearly a quarter of student loan borrowers default, Americans know that the Department of Education is failing to effectively manage and deliver these vital programs,” McMahon said in a statement.
Treasury Secretary Scott Besant said the change should have happened a long time ago.
“Under President Trump’s leadership, we are making the first serious effort to clean up a $1.7 trillion portfolio that has been badly messed up for years,” Bessant said in a statement. “Treasury has the unique experience, operational capabilities and financial expertise to bring long-needed fiscal discipline to the program and become a better steward of taxpayer dollars.”
But for Sen. patty murrayA Democratic appropriator from Washington, the new agreement raises more questions than answers.
“Despite all the administration’s talk about creating efficiencies, the truth is that these agreements only create meaningless new red tape — while jeopardizing the basic services and supports that students rely on every day,” she said in a statement. “Will student borrowers ultimately have to talk to two agencies to get the help they need? Will basic oversight and communication simply go away?”
