The Us Department: Loan Write-Offs And Time Limits

The US Department of Education is responsible for distributing and handling financial aid through the Office of Federal Student Aid. In 2025, President Trump attempted to dismantle the department, throwing the fate of its $1.6 trillion federal student loan portfolio into question. While only Congress can eliminate the department, the Trump administration could starve it of resources. Experts are concerned about how this will affect student loans, with the Treasury Department, Commerce Department, or the Small Business Administration (SBA) being considered as alternatives to manage the loans.

Student loan forgiveness

In the US, the Department of Education is responsible for overseeing federal student loans. However, there have been discussions and attempts to transfer this responsibility to another department, such as the Treasury Department, the Small Business Administration (SBA), or the Commerce Department.

Proponents of transferring responsibility for student loans argue that the Department of Education is not equipped to handle the complex task of managing student loans effectively. They suggest that other departments, like the Treasury, may be better suited due to their experience in collecting past-due debts.

On the other hand, critics argue that the SBA, for example, is an unusual choice as it is set up to process small business loans, not the tens of thousands of student loans. Experts warn of the potential chaos that could ensue from such a transition, with over 40 million Americans holding federal student loans.

Amidst these discussions, it is important to note that the terms and conditions of federal student loans cannot change, even if the overseeing agency does. The Education Department has final approval of all student loan forgiveness, and borrowers' rights are guaranteed and protected.

While there have been court rulings that have blocked Biden administration attempts at widespread student loan forgiveness, there are still existing loan forgiveness programs that individuals can apply for, such as the Public Service Loan Forgiveness program.

Student loan management

In the US, the Department of Education does not automatically write off federal student loans after a specific period. Unlike the UK, where student loans are written off after 30 years, US borrowers may find themselves repaying debts for an indefinite period. This has led to a student loan debt crisis, with many individuals facing long-term financial challenges.

To address this issue, the Biden administration has proposed relief measures, including student loan forgiveness of up to $20,000, which is currently being reviewed by the Supreme Court. Additionally, federal and private student loans may be eligible for an in-school deferment, allowing borrowers to postpone repayment while enrolled at least half-time. However, it is important to note that interest may accrue during this period, increasing the overall cost of the loan.

For those struggling with repayments, income-driven repayment plans are available, offering affordable payments based on family size and discretionary income. The Public Service Loan Forgiveness Program is another option, providing relief for borrowers working full-time in eligible public service positions who make 120 on-time monthly payments. Additionally, certain disability benefits or death may result in loan cancellation.

Effective student loan management involves understanding repayment options, staying informed about policy changes, and seeking opportunities for loan forgiveness or cancellation. By proactively managing student loans, borrowers can minimise long-term debt and improve their financial outlook.

Student loan repayment plans

In March 2025, former US President Donald Trump announced his plans to move the management of federal student loans to another department. This was part of a wider attempt to dismantle the Department of Education, which was established by Congress in 1979.

Trump's plans included moving the Department of Education's $1.6 trillion federal student loan portfolio to the Small Business Administration (SBA), which was set to lay off 43% of its workforce. This decision was criticised by experts, who noted that the SBA is set up to process small business loans, not the over 40 million student loan borrowers.

The White House Press Secretary at the time, Karoline Leavitt, stated that some key functions of the Education Department, including federal student loans, would remain at the agency, even if it was minimised.

It is important to note that the terms and conditions of federal student loans cannot change, even if the agency overseeing them does. Borrowers' rights are guaranteed and protected by the master promissory note that they sign when their loans are originated.

While there was much discussion and intention expressed by the Trump administration to shift the management of student loans, it is unclear if any concrete steps were taken to implement this plan, and it is possible that the Education Department continued to manage federal student loans.

Student loan servicers

The US Department of Education lends tens of billions of dollars to students and parents annually and oversees the collection of roughly $1.6 trillion in outstanding loans for over 40 million borrowers. The federal government is not likely to write off these loans, and even if the Education Department were to close, another federal entity would take over the loan system.

If you are unable to make payments, you should contact your loan servicer or lender right away to ask about your options. You may be eligible to postpone your student loan payments, but this will add to the overall cost of your loan. You can also look into student loan forgiveness programs. For instance, the Public Service Loan Forgiveness (PSLF) Program allows qualifying federal student loans to be forgiven after 120 qualifying payments (10 years) while working for a qualifying public service employer. This includes government, US military, state, local, or tribal employees, as well as certain non-profit organizations. Additionally, most federal student loans are eligible for at least one income-driven repayment (IDR) plan, which caps your monthly payments based on your income and family size. Depending on the IDR plan, the remaining balance on your loans may be forgiven after 20 or 25 years of repayment.

Student loan borrowers' rights

In 2025, President Trump announced plans to move the management of federal student loans from the Department of Education to another department. This has thrown the fate of the department's $1.6 trillion federal student loan portfolio into question.

Trump's plans to dismantle the Department of Education have caused concern among experts, who worry about the complicated and difficult process, and how it will affect the more than 40 million Americans who hold federal student loans.

Borrowers may find their applications for existing loan forgiveness programs stalled without the Education Department operating at full capacity.

Student loan borrowers have been in legal limbo, with around 8 million not making loan payments because their Biden-era repayment plan was frozen by a judge for being potentially illegal. They also cannot currently enrol in any of the federal government's income-driven repayment plans.

Frequently asked questions