The Trump Administration’s Plan to Overhaul the Department of Education
The Trump administration is considering significant changes to the U.S. Department of Education, particularly in how it manages the nation’s $1.6 trillion student loan portfolio. This portfolio, which affects over 44 million borrowers, is the third-largest source of household debt in the country. While the exact policies the administration will implement are still unclear, several proposals have emerged, including moving the student loan system to the Treasury Department, altering repayment plans, and even privatizing the entire system. These changes could have profound implications for borrowers, especially given the administration’s opposition to student debt relief programs expanded under President Joe Biden. Biden’s initiatives resulted in $188.8 billion in student loan forgiveness for 5.3 million borrowers, but Republicans have criticized these efforts as an overreach of executive authority. Some have even suggested clawing back relief, though this is considered unlikely.
Moving the Student Loan System to a New Home
One of the most significant proposals is to move the Office of Federal Student Aid (FSA), which currently operates under the Department of Education, to the Treasury Department. The FSA is responsible for managing federal student loans, grants, and work-study programs, including the Free Application for Federal Student Aid (FAFSA). Proponents argue that the FSA’s role as a “mega-bank” would align better with the Treasury Department’s focus on financial oversight and federal revenue collection. Rick Hess, a senior fellow at the American Enterprise Institute, suggests that this move could streamline operations without significantly impacting borrowers. However, legal experts warn that such a shift may require congressional approval, and any unilateral action by the Trump administration could face legal challenges.
Persis Yu, deputy executive director of the Student Borrower Protection Center, expresses concerns about the transition, noting that past changes to the student loan system have often been chaotic. Millions of borrowers are still grappling with the aftermath of pandemic-related payment pauses and legal battles over Biden’s forgiveness efforts. Moving the entire portfolio to a new agency could exacerbate these challenges, particularly if the Treasury Department’s debt collection-focused approach contrasts with the Department of Education’s emphasis on borrower rights under the Higher Education Act of 1965. Yu warns that this shift could leave borrowers in the hands of officials less equipped to manage their needs.
Changing the Ways Borrowers Repay Their Loans
Beyond relocating the FSA, some Republicans are pushing for more drastic overhauls to the student loan system. Project 2025, a conservative policy blueprint, proposes privatizing the entire system by transferring government-owned loans to private servicers. This would mark a significant departure from the current model, in which over 90% of borrowers rely on federal loans. Privatization would likely require congressional approval and is acknowledged as potentially infeasible. However, the Trump administration could still pursue smaller changes, such as consolidating repayment plans and scaling back forgiveness programs like Public Service Loan Forgiveness (PSLF).
PSLF, which was introduced by former President George W. Bush in 2007, offers debt relief to borrowers working in public service after 10 years of payments. While Congress would need to eliminate the program entirely, the Trump administration could restrict access by reverting to the program’s original, less generous terms. During Trump’s first term, the Education Department rejected 99% of PSLF applications, compared to the massive expansion under Biden, which saw the number of qualified borrowers rise from 7,000 to over 1 million. Any rollback of PSLF could disproportionately affect public sector workers, including teachers, nurses, and first responders.
The Broader Implications for Borrowers
The proposed changes to the student loan system reflect a broader philosophical shift in how the federal government approaches higher education and debt. The Department of Education’s focus on borrower protections and public service initiatives could give way to a more financially driven approach under the Treasury Department. While supporters argue that this could improve efficiency, advocates like Persis Yu fear it could harm borrowers by prioritizing debt collection over their needs. At a time when millions of borrowers are already struggling to restart repayments after pandemic-era pauses, any major changes to the system could create further confusion and hardship.
What Borrowers Can Expect in the Near Term
In the short term, borrowers are likely to see a pause on any new debt relief initiatives. The Trump administration is expected to halt or reverse Biden-era programs, including the SAVE plan, which has been stalled by legal challenges. Nearly 8 million borrowers remain in limbo as they await clarity on their repayment options. While some changes, like moving the FSA or consolidating repayment plans, may not immediately affect borrowers, the long-term impact could be significant. For now, borrowers should stay informed about potential policy shifts and prepare for a system that may become more complex and less forgiving.
The Road Ahead: Uncertainty and Challenges
The Trump administration’s vision for the Department of Education and the student loan system is ambitious, but its feasibility and legality remain uncertain. Moving the FSA, privatizing loans, and scaling back forgiveness programs are all contentious ideas that could face resistance from Congress, the courts, and advocacy groups. Borrowers, meanwhile, are caught in the middle, navigating a system already criticized for its complexity and inefficiency. As the administration pushes forward with these changes, the focus will be on whether they can improve the system or simply add to the chaos. One thing is clear: the stakes are high, and the outcome could shape the future of higher education financing for decades to come.
