The U.S. Department of Education headquarters is seen on March 06, 2025 in Washington, DC.
Chip Somodevilla | Getty Images News | Getty Images
The U.S. Department of Education planned for the Treasury Department to take a hand in managing the country’s $1.6 trillion student loan portfolio, recent court documents show.
“The Department had been negotiating a memorandum of understanding with the Treasury Department regarding student loan management,” Rachel Oglesby, the chief of staff at the Education Dept., said in a court declaration filed late on Tuesday.
The agreement involved moving nine Education Dept. employees from the agency’s Federal Student Aid Default Collections Unit to Treasury “to discuss collections activities,” a spokesperson for the Education Department told CNBC.
Education Department plans with the Treasury Department are now on hold after U.S. District Judge Myong Joun in Boston blocked the Trump administration on May 22 from its efforts to dismantle the Education Department.
Joun ordered the department to rehire the more than 1,300 employees affected by mass layoffs in March, and blocked the department from transferring student loans to the Small Business Administration.
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Experts say the Treasury talks are more evidence that the Trump administration hopes to reduce the role of the Education Department.
President Donald Trump said on March 21 that the Small Business Administration, instead of the Education Department, would handle the country’s debt.
“They’re all set for it,” the president said of the SBA, speaking to reporters in the Oval Office. “They’re waiting for it.”
Loan transfer to any other agency requires Congress
At the time of Trump’s announcement that student loans would move to the SBA, experts had said the next most logical agency would have been Treasury, since it already plays a role in collecting past-due debts from Americans through the Treasury Offset Program.
Still, financial aid expert Mark Kantrowitz pointed out that The Higher Education Act of 1965 is “very clear” that the Education Department’s Federal Student Aid office is “responsible for student loans.”
“It will require an act of Congress,” Kantrowitz said, to move the loans to either the SBA or Treasury.
Consumer advocates express worries that the mass transfer of accounts to another agency could trigger errors, or compromise borrowers’ privacy. They also raised concerns about how a change in agency might affect unique student loan protections, and programs such as Public Service Loan Forgiveness.
More than 42 million Americans hold federal student loans.