Clark Galvan
The US Department of Education is responsible for managing student loan debt for over 40 million borrowers, amounting to $1.5 trillion. The Department also oversees the Pell Grant, which provides aid to students below a certain income threshold, and administers the Free Application for Federal Student Aid (FAFSA). In March 2025, President Donald Trump signed an executive order to dismantle the Department of Education, with the intention of transferring its responsibilities to another federal agency. This has raised concerns about the future of federal student loans, as the Department of Education is currently responsible for approving all student loan forgiveness.
| Characteristics | Values |
|---|---|
| Main role | Financial |
| Annual distribution | Billions in federal money to colleges and schools |
| Manages | Federal student loan portfolio |
| Student loan debt | $1.5 trillion |
| Number of borrowers | Over 40 million |
| Loan forgiveness | The Education Department has final approval of all student loan forgiveness |
| Student loan management | The Treasury Department, Commerce Department or the Small Business Administration |
What You'll Learn
Student loan forgiveness
Despite these uncertainties, it's important to know that there are still programs and resources available to help borrowers in need. One key aspect to note is that the terms and conditions of federal student loans remain unchanged even if the agency overseeing them changes. This means that borrowers' rights are protected and they can continue to make informed decisions regarding their loan repayment plans.
One option for student loan forgiveness is the Total and Permanent Disability Discharge program, which forgives student loans for borrowers who are totally and permanently disabled, whether physically or mentally. Additionally, there is the Public Service Loan Forgiveness program for those working for qualifying government or nonprofit agencies.
For older adults struggling with student loan debt, there are also options available. Income-driven repayment plans, such as the Income-Based Repayment plan, base monthly payments on adjusted gross income (AGI) from sources like investments and Social Security. While some IDR plans may no longer offer forgiveness, it is important to explore these options to find assistance and relief.
It is crucial to be cautious of scams and false claims regarding student loan debt relief. The Federal Trade Commission (FTC) has taken action against defendants who falsely claimed they could help erase student loan debt, only to leave consumers in even deeper debt. Always seek official sources and trusted experts for guidance on student loan forgiveness programs.
Tennessee Harp Loans: What You Need to Know
You may want to see also
Student loan management
The Department of Education plays a significant role in overseeing and managing federal student loans. While there have been discussions about transferring this responsibility to other departments, such as the Treasury Department, Commerce Department, or the Small Business Administration, as of March 2025, the Department of Education still holds authority over student loan management. This includes having final approval over all student loan forgiveness applications.
For borrowers, it is important to know that the terms and conditions of federal student loans remain unchanged even if the overseeing agency shifts. Borrowers' rights are protected by the master promissory note signed when the loan is originated. To manage their loans effectively, borrowers can refer to resources provided by the Department of Education, which offer guidance on finding a loan, making payments, and applying for loan forgiveness.
Exit counselling is also provided to ensure borrowers understand their loan obligations and are prepared for repayment. Additionally, public service loan forgiveness is a common way for individuals to seek loan forgiveness. It is recommended that borrowers stay informed about news and updates regarding student loan management, such as the Saving on a Valuable Education (SAVE) Plan.
Effective student loan management involves staying informed, understanding one's loan obligations, and proactively exploring options for repayment or forgiveness. By taking a proactive approach, borrowers can make informed decisions and navigate their financial journey with greater confidence.
Loan Discrimination: Are Consumers Protected?
You may want to see also
Student loan debt
The management of federal student loans has been a topic of discussion for the Trump administration, which has sought to dismantle the U.S. Department of Education. Despite this, only Congress has the power to eliminate the Education Department. As of March 2025, there is uncertainty regarding the fate of the department's $1.6 trillion federal student loan portfolio. Experts warn of potential chaos, as the Trump administration has already reduced the department's staff by nearly half.
The management of student loans has been a point of contention, with President Trump stating that another agency should handle the loans. He suggested that the task could be assigned to the Treasury Department, Commerce Department, or the Small Business Administration. However, higher education expert Mark Kantrowitz argued that the Treasury Department is the most logical choice due to its existing role in collecting past-due debts through the Treasury Offset Program.
The impact of the pandemic on student loan debt has also been significant. The government initially offered relief measures, such as pausing collections on delinquent debt and not penalizing borrowers for missing payments. However, as payments resumed, a record-breaking share of student loans were marked delinquent, with nearly one-quarter of borrowers falling behind on payments. This situation could lead to a sharp drop in credit scores, making it more challenging and expensive for individuals to obtain credit cards, loans, and other financial services.
Loan Processors: Commission-Based or Salary-Based?
You may want to see also
Student loan borrowers
The US Department of Education is responsible for managing student loan debt for over 40 million borrowers, totalling approximately $1.5 trillion. The Department lends tens of billions of dollars to students and parents each year and oversees the collection of outstanding loans.
In 2025, President Donald Trump signed an executive order to dismantle the Department of Education, which left student loan borrowers concerned about the fate of their federal loans. The Trump administration's actions, including laying off staff and cutting contracts, were seen as attempts to starve the agency of resources. However, it's important to note that only Congress has the power to eliminate the Department of Education.
Experts and consumer advocates expressed worry about the potential impact on federal student loan borrowers. Mark Kantrowitz, a higher education expert, noted that transferring the responsibility for federal student loans to another agency, such as the Treasury Department, Commerce Department, or Small Business Administration, could disrupt existing loan management processes.
Despite the uncertainty, borrowers' rights are protected by the terms and conditions agreed upon when their loans were originated. Additionally, any agency that inherits the loan portfolio would need to retain the servicers who collect and track payments in the short term, ensuring some continuity in loan management.
While the future of the Department of Education and its loan management role may be uncertain, it is clear that the federal government will not simply forgive these debts, and borrowers can expect their loans to be transferred to another federal entity for ongoing management and repayment.
Target Employee Loans: What's the Deal?
You may want to see also
Student loan portfolio
The US Department of Education is responsible for overseeing federal student loans. In March 2025, President Donald Trump was expected to sign an executive order to dismantle the Department of Education, which holds a $1.6 trillion federal student loan portfolio. This raised concerns about the fate of the student loans of over 40 million Americans. However, only Congress has the power to eliminate the Department of Education, and the White House Press Secretary, Karoline Leavitt, stated that she expected federal student loan functions to remain.
Experts have suggested that the management of federal student loans could be transferred to another agency, such as the Treasury Department, the Commerce Department, or the Small Business Administration. The Treasury Department is seen as the most logical choice due to its existing role in collecting past-due debts through the Treasury Offset Program. Nevertheless, the potential transfer of responsibilities comes at a challenging time for federal student loan borrowers, as court rulings have blocked Biden administration initiatives for widespread loan forgiveness and more affordable repayment plans.
In the context of student loan management, the term "student loan portfolio" refers to a collection of student loans held by a lender or servicer. In July 2024, Discover Financial Services (DFS) announced its plan to sell a $10.1 billion private student loan portfolio to investment firms Carlyle and KKR. The sale price was expected to be up to $10.8 billion, representing a premium on the principal balance. This decision was part of Discover's efforts to streamline its operations and simplify its business mix. The transaction was expected to be finalised by the end of 2024, with the portfolio being serviced by Nelnet's Firstmark Services division after the sale.
The sale of student loan portfolios by lenders is not an uncommon occurrence. In 2022, student debt became a highly politicised issue in the US, with President Joe Biden proposing a measure to forgive $430 billion in student debt. However, this plan was blocked by the Supreme Court due to opposition from conservative-leaning states. The student loan business has faced regulatory scrutiny, with Discover reaching a consent order with the Consumer Financial Protection Bureau (CFPB) in 2015 due to issues with billing statements and tax information.
Co-op Bridging Loans: What You Need to Know
You may want to see also
Frequently asked questions
The Department of Education lends tens of billions of dollars to students and parents each year and oversees the collection of outstanding loans. It also manages the federal student loan portfolio, which includes approving student loan forgiveness.
If the Department of Education is shut down, another federal entity would take over the loan system. In the short term, the agency inheriting the loan portfolio would need to keep the services that collect and track payments.
President Trump has expressed his desire to shut down the Department of Education and has taken steps to do so by signing an executive order. He believes that the Department should not be handling loans and that this responsibility should be given to another agency, such as the Treasury Department, Commerce Department, or Small Business Administration.
