President Donald Trump has reportedly set his sights on eliminating the U.S. Department of Education, a long-time Republican goal and promise from his campaign. The proposed plan, though, gives rise to a host of unanswered questions—not least of which is what happens to the 42-plus million Americans with federal student loan debt.
While actually shuttering the department would require an act of Congress, the president's promises and recent actions in office—including signing a flurry of legally dubious Executive Orders—have left borrowers confused and worried.
It remains to be seen what exactly Trump will order or if he has the authority to carry out such a sweeping measure in the first place. But if the Department of Education (ED) were to close, it is possible that management of its current $1.7 trillion federal student loan portfolio would be moved to a different department or agency, like the Treasury Department, says Betsy Mayotte, president of the Institute of Student Loan Advisors.
"The terms and conditions are written into federal law and regulations and wouldn’t change," says Mayotte. "In the very unlikely event the ED does go away, the transition could create some delays in some actions but the terms themselves wouldn’t change."
Still, the transfer would cause "considerable upheaval initially and the issues could persist for years," says Kevin Ladd, chief operating officer and co-creator of Scholarships.com, who has worked in the higher education funding field for 25 years. The new department tasked with the management of loans would need more staffing and new computer systems, and there would need to be new oversight and other protection processes put in place.
Programs like Public Service Loan Forgiveness (PSLF) and income-driven repayments plans that help students discharge their loans more quickly could be at risk of "going away," he says.
"While federal student loans would likely continue to be an option for current and future college students, the terms would likely be much stricter and students should be taking that into consideration before signing off on anything," says Ladd.
ED manages not only the processing of loan payments and forgiveness programs, but the application for student loans as well (under the Free Application for Federal Student Aid, or FAFSA, and studentaid.gov). It also funds special needs programming around the country and enforces federal statutes prohibiting discrimination. All of this is codified in federal law and must be carried out, regardless of if the department exists or not.
Dismantling financial aid programs could also lead to fewer lower-income students attending college. It could also exacerbate the issue of students dropping out of college before they graduate because they cannot afford to stay. Already, 31% of students think about dropping out due to financial challenges, a 2024 Sallie Mae study found.
That "could have a profoundly negative impact downstream on the economy," says Dan Ulin, founder and CEO of Elite Student Coach in Los Angeles, California.
Student loan programs could face changes
Even if the ED isn't shut down, recently proposed legislation includes a number of changes that could affect students and families across the country, including to student loan eligibility and the discontinuation of the Parent and Grad PLUS Loan programs.
The proposal includes a new income-drive repayment (IDR) plan that "would decrease the amount undergraduate borrowers and certificate earners would eventually see canceled while increasing the amount canceled for the typical graduate school borrower" compared to the IDR plan implemented by the Biden-Harris administration, according to an analysis by the nonpartisan Center for American Progress (CAP).
It would also impose new student loan borrowing limits, which could further reduce access to higher education, CAP finds, or push more students into taking on more private loans—particularly for those coming from lower-income backgrounds.
"Private student loans are less regulated and less transparent, and they come with fewer protections than federal student loans," CAP higher education analysts write. "They may have variable interest rates, for example, and may not offer the deferments, forbearances, repayment plan options, and targeted cancellation pathways that federal student loans do."
Some borrowers are also concerned the Trump administration could try to reverse or hinder student loan forgiveness programs enacted under the Biden administration, of which Republicans were deeply critical. But Mayotte says that is not currently on the table.
"No. Full stop," she says of if reversing forgiveness is a possibility. "They could try, but there's no chatter about that and the courts have made it very clear they have no interest in doing that."
