President Donald Trump signed an Executive Order titled “Improving Education Outcomes by Empowering Parents, States, and Communities,” on March 20. The purpose of the motion is to dismantle the Department of Education—continuing his central battle in shrinking the size of the federal government, a charge spearheaded by his Department of Government Efficiency [DOGE], under the watchful eye of Elon Musk.
Linda McMahon, the newly-instated Secretary of the Department of Education, was present when Trump signed the Executive Order. “[Trump] wants to improve education for children, he wants to get those dollars—even more dollars—back to the states, without the bureaucracy of Washington,” she later told reporters.
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“The Federal Student Aid (FSA) program is roughly the size of one of the Nation’s largest banks, Wells Fargo,” states the Executive Order about the almost $1.7 trillion student loan portfolio. “But although Wells Fargo has more than 200,000 employees, the Department of Education has fewer than 1,500 in its Office of Federal Student Aid. The Department of Education is not a bank, and it must return bank functions to an entity equipped to serve America’s students.”
McMahon addressed concerns from those with student loans when speaking to press. “Student loans currently are handled by the Department of Education, but I think that they should perhaps be managed by someone else, another department,” she said. “Whether they go back to the private sector, or perhaps they go to the Treasury. But as of right now, we’re not taking any action against student loans, except that we probably are going to renew collection.”
The concerns regarding student loans started to grow significantly after an announcement was made on March 11 that nearly 50% of the Department of Education is set to be laid off this month—a part of its “final mission,” according to the department’s website.
During his announcement of the Executive Order, Trump acknowledged that the “core necessities” of the Department will still continue—including distribution of Pell Grants, which are a form of federal student aid for higher education.
Trump also acknowledged that he will not be able to completely close the Department of Education without the backing of Congress, and he would need Democratic votes to make that happen.
“The Democrats know it’s right. I hope they’re going to be voting for it,” Trump said. “Because ultimately, it may come before them.”
Amid Trump’s attempts to dismantle the Department of Education, experts are concerned about the complicated and difficult process—and how it will affect student loans.
Here’s what we know so far:
What does the Department of Education do?
The Department of Education has many different and varied responsibilities under its current formation—aside from distributing and handling financial aid through the Office of Federal Student Aid.
The Department was established by Congress in 1979, and its responsibilities have typically been issued by lawmakers, since the U.S. Constitution does not have guidelines for education at the federal level.
The department provides 13.6% of funding for public K-12 education, according to the Education Data Initiative.
Important funding streams for the department to send to local schools include Title I—which describes federal allocation of supplemental financial assistance to school districts/schools with a high percentage of children from low-income families, as well as grants under IDEA (Individuals with Disabilities Education Act), providing money to districts to serve and teach students with disabilities.
The department also collects data on education facilities nationwide, and enforces non-discrimination and civil rights laws in federally funded schools, including Title VI and Title IX.
Read More: What Does the Department of Education Actually Do?
What has Trump said will happen to student loans?
In the Oval Office on March 6, Trump was asked what department or agency would handle student loans if the Department of Education was dismantled.
Trump told reporters that he doesn’t believe student loans should be run under the Department of Education, and instead will likely end up being run under the Treasury Department, the Small Business Administration (SBA), or the Commerce Department.
“We’ve actually had that discussion today,” Trump said. “The loans would be brought into a group where they really do that…that is, by the way, the most complicated thing in moving, but it’s really simple if you do that.”
Trump said he hopes specifically for the SBA to get a hold of them, which he says Kelly Loeffler—a Republican, a former senator from Georgia, and the new administrator of the SBA— has already expressed interest in.
“Kelly really liked it and would like to do it,” he told reporters.
On March 21, the day after Trump signed the Executive Order, he announced his intention to move forward with his plans to move the student loan portfolio to the SBA.
“I've decided that the SBA, the Small Business Administration, headed by Kelly Loeffler, [who] is a terrific person, will handle all of the student loan portfolio," the President said, speaking from the Oval Office. “We have a portfolio that's very large, lots of loans, tens of thousands of loans—pretty complicated deal. And that's coming out of the Department of Education immediately.”
Elsewhere on March 21, the SBA announced plans to lay off 43% of its workforce.
What are experts saying about Trump’s plan?
According to Andrew Gillen, research fellow at the Cato Institute for Economic Freedom, the SBA would be a “strange choice” because the office is set up to process small business loans, Gillen “doubts” they’d be set up to handle over 40 million student loan borrowers.
Gillen and Jonathan E. Collins, an assistant professor of political science and education at Teachers College, Columbia University, both argue that it will be more likely a job for the Treasury Department.
“A lot of the student loan repayment programs already require income verification, which the Treasury Department already has,” Gillen told TIME on March 7. “So, from an efficiency perspective, that makes sense. And they're already scaled up to handle millions of new borrowers.”
The outstanding federal student loan balance is $1.693 trillion, per the Education Data Initiative, and is managed separately from the department’s policy apparatus, primarily through the FSA. Gillen says, though, that the topic of student loans is completely separate from Trump’s issues with the Department of Education, considering that many big financial aid programs—including the Pell Grant and work study—existed before there was a Department of Education. Whether they would run better, or more equitably, outside the Education Department depends heavily on where Trump ends up moving student loan administration.
Much of the uncertainty around student loan forgiveness, per Gillen,, is not related to the Trump Administration, but rather the student loans cases that are moving through the court system—particularly the Biden-Harris Administration’s Saving on a Valuable Education (SAVE) plan, which was blocked by the 8th Circuit Court of Appeals in mid-February.
But with the massive layoffs at the department, there are concerns as to whether there will be enough government capacity to work on student loan relief.
“Even if the courts uphold the federal student aid relief and we continue to see things like the Pell Grant program making investments in higher education opportunities, and even if we see some version of a research grants program that is able to survive this anti-DEI purge, who is going to actually process these things?” Collins remarked, following the initial news of the planned layoffs. “How does work get done when no one is at work?”
Collins also argued that if cutting wasteful spending is what DOGE wants to do, the Department of Education is not the place—considering that the department has the smallest staff of the 15 Cabinet agencies.
“It's clear that this is more of a political game,” he said. “It’s become more about what the Department of Education represents than what the Department of Education actually does.”
What has happened regarding student loans since Trump returned to the White House?
In late February, the Department of Education shut down parts of the applications for SAVE and other income-driven repayment (IDR) plans. Though Trump has distanced himself from Project 2025, a far-right Heritage Foundation policy plan unveiled in April 2023, the initiative has since been mirrored in many of his early actions. The Project 2025 document suggested phasing out IDR plans for student loan borrowers as well, and replacing it with a one-size-fits-all IDR plan. In June 2024, the Center for American Progress stated that this plan would “mean spiked monthly student loan payments, ballooning interest, and heavy blows to credit scores.”
Read More: What Student Loan Borrowers Need to Know About Income-Driven Repayment Plans
The document also suggested transferring the FSA—the largest provider of student financial aid in the nation—to “a new government corporation with professional governance and management” and that the Administration should consider returning to a system in “which private lenders, backed by government guarantees, would compete to offer student loans, including subsidized and unsubsidized, loans.”
Gillen said with so much uncertainty, the fallout of what Trump’s plans are for the Education Department cannot be fully predicted—and this uncertainty has caused alarm among student loan borrowers and forgiveness advocates.
“Borrowers already struggle with massive call wait times to contact their servicers. The likely disruptions caused by a resource-starved Department of Education without the ability or desire to ensure proper oversight of loan servicers, will result in mass chaos, more delinquencies and defaults, and worse,” the Student Borrower Protection Center wrote on its website on March 3.
On March 7, Trump signed an Executive Order entitled “Restoring Public Service Loan Forgiveness” in which he moved to limit eligibility for the Public Service Loan Forgiveness Program (PSLF), which has allowed government workers like teachers or police, as well as nonprofit, receive loan forgiveness after making consecutive payments for 10 years.
In the Executive Order, Trump excludes from the program “individuals employed by organizations whose activities have a substantial illegal purpose.” The President’s aim is to exclude organizations and nonprofits that engage in activities he says support "illegal immigration, human smuggling, child trafficking, pervasive damage to public property, and disruption of the public order, which threaten the security and stability of the United States."
“Instead of alleviating worker shortages in necessary occupations, the PSLF Program has misdirected tax dollars into activist organizations that not only fail to serve the public interest, but actually harm our national security and American values, sometimes through criminal means,” the Executive Order reads.
On March 19, the American Federation of Teachers announced they were suing the Trump Administration for their actions in regards to student loans and the PSLF program.
For Collins, his overall concern about student loans is how further changes to the system might impact affordability—one of Trump’s major assurances that he campaigned on—especially as student loans typically allow for more affordable access to higher education.
“The story of the higher education system in America is that it has been a ladder for opportunity,” Collins said. “And now you're kicking the ladder when folks are in the middle of the climb. So what's the pathway to the top now?”
It’s this concern that remains at the forefront of Collins’ mind, and that of many others, as the future and direction of student loans remains uncertain.