The Department of Education has announced an agreement to transfer student-loan borrowers to the Treasury Department.
The transfer will begin with accounts belonging to borrowers in default.
This marks Trump’s first move toward shifting federal student loans out of the Department of Education.
The Trump administration has taken its first step in transferring the student-loan portfolio away from the Department of Education.
On Thursday, the Department of Education revealed a partnership with the Treasury Department to oversee the $1.7 trillion student-loan portfolio. The interagency agreement will transfer the portfolios of defaulted borrowers to the Treasury, allowing the agency to collect defaulted debt and assist borrowers who have fallen behind.
Nearly 9 million borrowers are currently in default, which typically occurs after 270 days of missed federal student-loan payments.
Before this agreement, the Department of Education’s Default Resolution Group handled those responsibilities. A fact sheet stated that the agreement will roll out in phases; the Treasury will start with defaulted portfolios and later “work to provide operational support over non-defaulted federal student loan debt, to the extent practicable and permitted by law.”
“As the Federal student aid portfolio soars to nearly $1.7 trillion and with nearly a quarter of student loan borrowers in default, Americans know that the Department of Education has failed to effectively manage and deliver these critical programs,” Linda McMahon, the education secretary, said in a statement. “By leveraging Treasury’s world-renowned expertise in finance and economic policy, we are confident that American students, borrowers, and taxpayers will finally have functioning programs after decades of mismanagement.”
The Department of Education stated that the Treasury is best suited to oversee federal student loans because it already distributes funds for federal student aid programs and has access to borrowers’ tax data. Treasury Secretary Scott Bessent said in a statement that the agency has “the unique experience, the operational capability, and the financial expertise to bring long overdue financial discipline to the program and be better stewards of taxpayer dollars.”
President Donald Trump has previously indicated plans to move the student-loan portfolio to another federal agency as part of his broader goal to dismantle the Department of Education. In March 2025, he said he was considering the Small Business Administration for the role, while McMahon later noted that the Treasury was also being considered.
This announcement comes at a crucial time for student-loan borrowers. The Trump administration is preparing to implement major repayment changes from Trump’s “big beautiful” spending legislation, which introduces new repayment plans and borrowing limits. The fact sheet stated that the new partnership offers a “promising opportunity to return borrowers to repayment.”
Advocates have criticized the move. Kyra Taylor, a staff attorney at the National Consumer Law Center, said in a statement that shifting student-loan management to the Treasury “raises a new set of obstacles and uncertainty with no plan in place to resolve them.”
“The Department of Education hasn’t answered the question of how it will educate Treasury staff on borrowers’ rights under the Higher Education Act or how it will ensure clear communications with borrowers during this confusing transition,” Taylor said.
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