The Trump administration is moving forward with the thought to transfer the federal government’s $1.6 trillion student loan portfolio to a different government agency.
President Donald Trump said Friday that management of federal student loans would move from the Education Department to the Small Business Authority, or SBA, “immediately.” It’s likely the move will face legal pushback.
The announcement comes after a chaotic period on the Education Department, which oversees student loan repayment for greater than 40 million borrowers. On Thursday, the White House issued an executive order geared toward dismantling the department, and last week the department announced layoffs that can cut the agency’s staff in half.
Higher education groups and student advocates had already expressed deep concerns in regards to the plan for redistributing the Education Department’s responsibilities before Trump made his comments about transferring the coed loan portfolio — which was a departure from what White House Press Secretary Karoline Leavitt said lower than 24 hours prior.
Jessica Thompson, senior vice chairman of The Institute of College Access & Success, said in an announcement Friday that the administration has “decimated staffing and oversight capabilities” at each the Education Department and Small Business Authority and has “no clear strategy.”
“This will only end in borrowers experiencing erratic and inconsistent management of their federal student loans. Errors will prove costly to borrowers and ultimately, to taxpayers,” she said.
There’s still lots we don’t find out about what could occur, however it’s necessary for borrowers to do not forget that even when a transfer does occur, the terms and rates of interest on their loans is not going to be changing. An important thing borrowers can do straight away is keep detailed records. Here’s what else we do (and don’t) know:
When will student loans be moved from the Education Department?
That’s not clear straight away. In talking to reporters Friday, Trump said it might occur “immediately.” But legal pushback could pause any possible changes.
“I do know he said immediate but nothing goes to be immediate,” says Betsy Mayotte, president of The Institute of Student Loan Advisors, which offers free advice to borrowers on paying back their loans.
The White House hasn’t provided any details about how such a transition would work, including whether staffers on the Education Department who’ve knowledge of the coed loan system would move to the SBA to proceed working on it.
In its executive order, the administration suggested that the Education Department, and specifically the Federal Student Aid office, was too small to administer such a big portfolio. It noted that the scale of the coed loan portfolio is roughly the scale of among the nation’s largest banks — although the office has a much smaller staff than those banks do.
However the SBA can also be a comparatively small agency. It currently has a staff of about 6,500, and it announced Friday morning that it might cut its workforce by 43%.
Do I still must keep paying my loans?
Yes — transferring the loans to a different agency doesn’t equate to canceling them.
“I can’t emphasize enough that this will not be the time to be making any panicked financial decisions,” Mayotte says.
To whom do I pay my loans?
You need to proceed making payments to your servicer until you hear in another way.
Many of the work on managing repayment is completed by loan servicers and third-party vendors, not the department itself. It’s possible that even when a move to the SBA happens, borrowers will still take care of the identical servicers and databases and that the day-to-day experience won’t change, Mayotte says.
What does this mean for income-driven repayment and Public Service Loan Forgiveness?
Income-driven repayment plans and Public Service Loan Forgiveness, or PSLF, are written into law. That doesn’t mean there is not going to be changes to those programs — Trump has already messaged with a previous executive order that he’d wish to limit the roles that qualify for PSLF , and the Education Department has paused all applications to income-driven plans in response to a court injunction.
It’s likely borrowers will see changes to those programs coming down the road. However the possible shift of the portfolio to SBA, by itself, doesn’t affect them.
What else should I do know or do straight away?
Log into your servicer account and into your account with Federal Student Aid to document what you owe and where you’re in your repayments.
Assuming Trump is capable of follow through and the loan portfolio is in truth transferred to the SBA, you need to remain vigilant throughout the period of transition. Take a screenshot of each payment you make, and download documents that track your payment history. It’s a great idea for all borrowers to take these steps, however it’s especially critical for individuals who are working toward forgiveness via income-driven repayment or PSLF.
Sarah Sattelmeyer, the project director for education, opportunity and mobility on the upper education team at Latest America said in an email Friday that she has plenty of unanswered questions. But at a minimum, “a move of this magnitude might be extremely messy and inefficient for everybody — including borrowers who depend upon loan relief, contractors who administer the programs and staff who manage the programs and supply oversight — and runs the chance of breaking the system in the method.”
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