WASHINGTON D.C. – The future of the Department of Education’s financial arm remains uncertain as President Donald Trump moves forward with plans to dismantle the agency. The department’s financial portfolio, which includes managing trillions of dollars in student debt and providing loans directly to borrowers, faces challenges such as steep staff cuts and a lack of communication, according to interviews with current and former department employees.
The financial portfolio, totaling $1.64 trillion, is managed separately from the department’s policy apparatus, which Trump aims to wind down or transfer to other agencies. With a significant loan balance complicating efforts to close the agency, the question of where the debt will be transferred lingers, with options including Treasury, Commerce, or the Small Business Administration.
There is also uncertainty around whether the government will continue to lend money directly to students. A proposal called Project 2025 suggests establishing a new agency to handle future loans, overseen by a Senate-confirmed leader and board of trustees. Under this plan, the government would no longer make loans directly but serve as a guarantor for loans underwritten by other companies, with the new agency funded by Congress.
As loan defaults increase and more borrowers struggle to make payments, concerns arise about the ability of the Treasury Department to manage the growing portfolio. With approximately 40% of loans currently delinquent, experts warn of a potential wave of new defaults as borrowers face the end of payment pauses and changes to repayment programs.
The Education Department’s efforts to assist borrowers in staying current on payments are hindered by dwindling staff and the cancellation of affordable repayment plans. Communication with borrowers regarding payment options is crucial, but with staff reductions and changes to loan programs, many are left wondering how they will manage their student debt.
The potential layoffs and buyouts within the Department of Education raise concerns about whether the agency will be able to effectively serve borrowers and provide necessary support. With a significant reduction in staff numbers expected, the future of the student aid division remains uncertain.
Amidst these challenges, the Education Department faces criticism for its handling of the student aid application process, which has caused confusion and delays in aid disbursements. Efforts to revamp the process have been met with backlash, highlighting the importance of adequate funding and skilled staff to manage the complex system.
The looming changes within the Department of Education’s financial arm reflect broader shifts in federal education policy, raising questions about the future of student lending and debt management in the United States. As borrowers and employees navigate these uncertainties, the impact of these changes on the education system and individuals across the country remains to be seen.