Federal Student Loans

The Trump administration has begun the first phase of a three‑phase interagency transfer that moves roughly $180 billion—about 11% of the $1.7 trillion federal student‑loan portfolio—of defaulted loans from the Education Department to the Treasury, with later phases slated to shift servicing of non‑defaulted loans and administration of the FAFSA to Treasury. Officials say borrowers need take no action and will keep the same servicers, and administration leaders frame the move as fixing mismanagement (citing 9.2 million borrowers in default and 2.4 million in late‑stage delinquency), while unions and critics call it an unlawful dismantling of the Education Department and warn the shift may face legal challenges because federal law generally vests loan oversight in Education.