President Donald Trump is expected to sign an executive order Thursday. This action specifically addresses the efforts to dismantle the U.S. Department of Education. Additionally, the move creates new uncertainty over the department’s $1.6 trillion federal student loan portfolio, injecting new confusion for borrowers. The Education Department has already been subject to significant cutbacks. Its possible dissolution casts serious doubt on the future of student loan management and forgiveness programs.
The Education Department has already experienced an almost 20 percent drop in its workforce. The department has since during that time laid off almost half of its staffers, down to 2,183 employees. That’s a dramatic drop from the 4,133 staff it employed when President Trump took office last January.
Which agency should take over the Education Department’s role in regulating the federal student loan industry is an important thing to consider as we look ahead. The Treasury Department, the Commerce Department, and the Small Business Administration (SBA) seem like the most likely contenders.
Other experts have warned that some of those agencies are ill-equipped to handle it.
Neither Commerce nor SBA has any relevant experience. - Mark Kantrowitz
The Education Department has been an essential linchpin with student loan forgiveness programs, including Public Service Loan Forgiveness and Defense to Repayment. Student loan servicers are the ones who take applications for relief and handle the day-to-day paperwork. Only the Education Department has ultimate authority over all forgiveness applications.
Court decisions have stalled the Biden administration’s efforts to rollout across-the-board loan forgiveness, and easier to navigate repayment plans. These judicial challenges have created additional and avoidable confusion and costs for millions of borrowers. Given the Education Department’s lack of clarity moving forward, many borrowers are experiencing applications for established loan forgiveness programs being unnecessarily put on hold.
Despite the potential shift in oversight, experts emphasize that the fundamental terms and conditions of federal student loans will remain unchanged. With a new agency at the controls, the loan agreements themselves will remain in effect.
For the record, it would take an act of Congress to finally kill the Education Department. An executive order can begin to implement changes, but ultimately, it is the legislative branch of government that has the authority to enact any permanent structural changes.
