Student Loans Shift to Treasury Department as Trump Administration Dismantles Education Department
The U.S. Treasury Department will begin taking over management of federal student loans currently held by the Department of Education, starting with loans in default. This move, announced on March 19, 2026, is a key step in the Trump administration’s ongoing effort to dismantle the federal education agency.
The agreement outlines a three-phase realignment of the nation’s federal student loan programs, which have been overseen by the Education Department for over 40 years.
the Treasury Department is expected to assume responsibility for all federal student loans, though a timeline for the complete transition has not been established. The initial phase focuses on the approximately $180 billion (11%) of the total $1.7 trillion student loan portfolio that is currently in default.
What Do Student Loan Borrowers Need to Know?
The administration has stated that borrowers do not need to take any immediate action. Loan servicers and repayment methods will remain the same during the transition. Borrowers with defaulted loans can find information at myeddebt.ed.gov.
Which Loans Are Affected?
The first phase of the transfer involves approximately $180 billion in defaulted student loans, representing around 11% of the overall $1.7 trillion federal student loan portfolio.
Why is This Change Happening?
The transfer of student loan management to the Treasury Department is part of President Trump’s broader plan to dismantle the Department of Education. While only Congress has the authority to formally close the department, the administration is implementing this plan through intergovernmental agreements that shift the department’s functions to other federal agencies.
What About Involuntary Collections?
Involuntary collections, such as wage garnishment and tax refund withholding, on federal student loans are currently paused. The Trump administration announced in February 2026 that it was delaying plans to resume these actions for borrowers in default.
Borrowers with defaulted loans can explore loan rehabilitation programs by contacting their loan holder.
As of March 2026, approximately 9.2 million Americans are in default on their student loans.