Treasury Department to take over some federal student loans, as Trump administration works to dismantle Education Department
By Piper Hudspeth Blackburn, CNN
(CNN) — The Treasury Department will begin to manage federal student loans in default, taking on a key function of the Education Department as the Trump administration further pushes to dismantle it.
The Treasury Department “will assume operational responsibility” for collecting on defaulted federal student loans and “provide operational support” to the Education Department’s efforts to get borrowers to resume paying their loans under the newly announced Federal Student Assistance Partnership.
The Education Department announced the move in a joint news release Thursday, and it comes as the agency presses on with efforts to transfer much of its work to other federal agencies in an attempt to convince Congress the department is no longer needed.
More than 7 million borrowers are in default, according to the agency. Federal student loans go into default after 270 days without payment.
The Treasury will “in subsequent phases,” according to the announcement, eventually take over control of the entirety of the Education Department’s nearly $1.7 trillion loan portfolio.
Education Secretary Linda McMahon touted the new arrangement in a statement, insisting the move would “dramatically” improve the way federal student loans are handled.
“By leveraging Treasury’s world-renowned expertise in finance and economic policy, we are confident that American students, borrowers, and taxpayers will finally have functioning programs after decades of mismanagement,” she said.
“Treasury has the unique experience, the operational capability, and the financial expertise to bring long overdue financial discipline to the program and be better stewards of taxpayer dollars,” Treasury Secretary Scott Bessent said.
Some consumer advocates quickly slammed the new move. National Consumer Law Center staff attorney Kyra Taylor said it would increase confusion and create a “new set of obstacles and uncertainty with no plan in place to resolve them.”
“The Department of Education hasn’t answered the question of how it will educate Treasury staff on borrowers’ rights under the Higher Education Act or how it will ensure clear communications with borrowers during this confusing transition,” Taylor said in a statement.
Last year, President Donald Trump signed an executive order to begin dismantling the Education Department, and just months after McMahon announced an interagency agreement to transfer its workload to other departments.
Trump, who has called on McMahon to “put herself out of a job,” had said some of the department’s programs could be moved to other federal agencies if it were abolished.
While eliminating the Education Department requires approval from Congress, the “partnerships” are just some of the workarounds McMahon has sought in order to shutter the agency, including cutting nearly half of its staff.
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