Trump Administration Moves Forward with Education Department Dismantling, Transfers Student Loan Management to Treasury
WASHINGTON – In a significant step toward potentially dismantling the U.S. Department of Education, the Trump administration announced an agreement to transfer management of federal student loans to the U.S. Treasury Department. The move, announced on Thursday, March 20, 2026, will initiate with defaulted loans, representing approximately $180 billion, or 11% of the total $1.7 trillion federal student loan portfolio .
Phased Transition and Long-Term Goals
The plan unfolds in three phases. Initially, the Treasury Department will assume responsibility for collecting on defaulted federal student loan debt and assisting borrowers in returning to repayment . A second phase, without a defined timeframe, envisions the Treasury assuming “operational responsibility” over non-defaulted loans “to the extent practicable” . The administration aims for the Treasury Department to manage all federal student loans.
Political Context and Department Closure
This transfer is part of President Trump’s broader effort to close the Department of Education, an initiative first announced almost a year ago . Secretary of Education Linda McMahon stated that the move is intended to address perceived mismanagement of federal student loan programs by the Education Department, citing a nearly 25% default rate among borrowers . The administration believes the Treasury Department’s expertise in finance and economic policy will improve program functionality and assist borrowers .
Minimal Impact on Borrowers During Transition
The administration has assured borrowers that they will not need to take any action during the transition. Loan servicers and repayment methods will remain the same .
Expert Analysis
Andrew Gillen of the Cato Institute noted that this move represents the largest component of the Education Department’s budget and staffing, making it a substantial step toward potential closure . Undersecretary of Education Nicholas Kent echoed this sentiment, characterizing the transfer as the “next and largest step toward winding down the Department of Education” .
Broader Department Restructuring
This interagency agreement follows a series of moves by the Trump administration to shift responsibilities and reduce the scope of the Education Department. The department has already reduced its size by over 40% and entered into 10 interagency agreements . The administration aims to continue streamlining federal programs and potentially codify these changes through legislation .