Education Department: Charging Off Loans?

The U.S. Department of Education, established by Congress in 1979, is responsible for overseeing federal student loan programs, distributing financial aid, and enforcing policies to protect borrowers from predatory lending practices. In 2025, President Donald Trump signed an executive order to abolish the department, raising concerns about the fate of student loans. Despite the potential dismantling of the department, experts agree that borrowers will still be required to fulfill their loan commitments. The loan portfolio is expected to be transferred to another federal agency, with the Treasury Department considered the most logical choice due to its existing role in debt collection.

Student loan obligations will remain intact

The U.S. Department of Education (DoE) was established by Congress, and only Congress can abolish it. While there has been much discussion about dismantling the DoE, it is unlikely to happen as it does not have bipartisan support. Even if the department is abolished, student loan programs—many of which predate the DoE—would likely be transferred to another federal agency rather than eliminated entirely.

Experts agree that student loan obligations will remain intact even if the DoE is dissolved. This is because the federal government will not give up the hundreds of billions of dollars in revenue that student loan repayments bring in each year. Regardless of which federal entity takes over the loan system and oversees repayment, borrowers will still be required to fulfill their loan commitments. The terms and conditions of federal student loans cannot change even if the agency overseeing them does. Borrowers' rights were guaranteed when they signed the master promissory note when their loans were originated.

There is a risk, however, of the Department of Education removing or failing to update information on websites that students need to understand their federal aid and financial aid options, as well as what they need to do to renew. This could introduce uncertainty into loan servicing, possibly delaying repayments, altering forgiveness programs, or making it harder for students to access federal aid.

While it is not yet clear which agency would take over the student loan portfolio, the most likely candidates are the Treasury Department, the Commerce Department, or the Small Business Administration. Experts say the most logical agency would be the Treasury Department, as it already plays a role in collecting past-due debts from Americans through the Treasury Offset Program.

The Department of Education has final approval of all student loan forgiveness

The Department of Education (ED) has been the subject of discussions and attempts to dissolve it, with President Donald Trump signing an executive order to that effect. However, the department was established by Congress, and only Congress can abolish it.

Despite the attempts to eliminate the ED, it currently has the final approval of all student loan forgiveness. This means that, even if the department is dissolved, borrowers will still be required to fulfill their loan commitments. The student loan programs would likely be transferred to another federal agency, such as the U.S. Treasury, rather than being eliminated.

The ED's role in student loan forgiveness has been significant. For instance, the Biden administration, through the ED, approved student loan forgiveness for 4,550 borrowers through the income-based repayment (IBR) plan, totaling $600 million. Additionally, the ED approved forgiveness for 4,100 borrowers who attended DeVry University through borrower defense to repayment, though the total dollar amount for this forgiveness was not specified.

The ED's involvement in student loan forgiveness extends further, as it has approved a total of $188.8 billion in student loan forgiveness for 5.3 million borrowers during the Biden administration. This includes forgiveness for over 150,000 borrowers through borrower defense, Public Service Loan Forgiveness (PSLF), and total and permanent disability discharges.

The ED's role in overseeing student loan forgiveness is crucial, and its potential dissolution could introduce uncertainty and delays in the loan forgiveness process.

The Department of Treasury would take over federal student loans

The Department of the Treasury would take over federal student loans if the Department of Education is dismantled. This is because the Department of Education was created by Congress, and only Congress can abolish it.

The Department of Education currently oversees federal student loan programs, distributes financial aid, and enforces policies meant to protect borrowers from predatory lending practices. It manages $1.5 trillion in federal loans for nearly 43 million borrowers. The office of Federal Student Aid (FSA) within the Department of Education is the administrator of the student loan portfolio and is protected by law.

If the Department of the Treasury were to take over federal student loans, it would be responsible for managing the federal student loan portfolio, including the $1.6 trillion in loans for roughly 43 million borrowers. The Department of the Treasury's role would be to collect taxes and oversee federal revenues related to the student loan program.

There have been concerns about the potential impact of transferring responsibility for student loans to the Department of the Treasury. Some experts have warned that past attempts to have the Treasury Department directly manage student loans were "not as effective" as private contractors. There is also a risk of increased reliance on private lenders, which could negatively impact students from low-income families.

It is important to note that even if the Department of Education is eliminated, borrowers who owe money on their federal student loans would still be expected to continue paying back their debt.

The Department of Education manages the $1.693 trillion federal student loan balance

The US Department of Education (DoE) is responsible for managing the $1.693 trillion federal student loan balance. The DoE was created by Congress and would need to be eliminated by Congress. It is the largest source of loans for college students.

The Department of Education lends tens of billions of dollars to students and parents each year and oversees the collection of roughly $1.6 trillion in outstanding loans for over 40 million borrowers. The DoE also distributes financial aid and enforces policies meant to protect borrowers from predatory lending practices.

In 2025, President Donald Trump signed an executive order to abolish the Department of Education, stating that student debt should be managed by another agency. He suggested that the Small Business Administration, the Treasury Department, or the Commerce Department could take over federal student loan management. However, dissolving the DoE would require congressional approval, which remains uncertain.

Experts agree that even if the Department of Education is abolished, borrowers will still be required to fulfill their loan commitments. The loan portfolio would likely be transferred to another federal agency, and the terms and conditions of federal student loans cannot be changed.

The Department of Education cannot be eliminated through an executive order

The Department of Education was established by Congress in 1979 during the Carter administration. It was created to improve American education and consolidate the various education programs that existed at the time. Since its creation, the department has been responsible for overseeing federal student loan programs, distributing financial aid, and enforcing policies that protect borrowers from predatory lending practices.

Despite some support from Republican elected officials, there is currently no bipartisan support for eliminating the Department of Education. In fact, more than 60 percent of voters oppose dismantling the department, according to a Wall Street Journal poll. This suggests that eliminating the department would not be a popular decision.

In addition, the Department of Education cannot be eliminated through an executive order because it was established by Congress and only Congress has the authority to abolish it. Any attempt to dismantle the department would require legislative approval, likely in the form of a bill that would need to pass in the Senate with at least 60 votes. Given the current lack of bipartisan support, it is unlikely that such a bill would pass.

While President Trump has signed executive orders aimed at reducing the staff and resources of the Department of Education, these orders do not have the power to eliminate the department entirely. Instead, they seek to gut the department by transferring key functions to other federal departments. However, this could introduce uncertainty and disrupt essential services that American students depend on.

In conclusion, the Department of Education plays a crucial role in providing educational opportunities and resources to students across the country. While there may be criticism of its effectiveness, eliminating the department through an executive order is not a viable option. Any attempts to do so would require the support of Congress, which is currently unlikely to be obtained.

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