Trump administration moves to dismantle Department of Education, shifts student loan operations to Treasury

The Trump administration has moved decisively toward dismantling the federal Department of Education, announcing a landmark interagency agreement that shifts student loan operations to the Department of the Treasury. The transfer positions the Treasury to manage defaulted federal student loans and support repayment efforts, marking what officials describe as the largest step yet in a multiphase plan to redistribute the department’s responsibilities.

Officials argue that the move aims to streamline federal programs, reduce taxpayer losses, and demonstrate that the department is not essential for the administration of student aid. Nicholas Kent, Undersecretary of Education, told Fox News Digital, "I think we've been very clear about this last week that this is a multiphase process."

Treasury takes operational control of student loans

The agreement assigns the Treasury full operational responsibility for collecting on defaulted federal student loans and providing operational support to return borrowers to repayment. Andrew Gillen of the Cato Institute emphasized the significance of the transfer, telling Fox News Digital, "Whereas this student loan move–this is the biggest staffing and the biggest budgetary component of the Department of Education. So, if it's sent over to Treasury, this really does indicate that this is moving a substantial portion of the Department of Education elsewhere."

Kent echoed the assessment, stating to Fox News Digital, "Characterizing it as the next and largest step toward winding down the Department of Education is absolutely the right way to think about it."

Campaign promise becomes policy

The transfer fulfills President Donald Trump’s campaign promise to eliminate the Department of Education. During the 2024 campaign, Trump signed an executive order instructing his administration to begin disbanding the agency. Kent explained to Fox News, "The Secretary has been on the record saying that these interagency agreements are proof of concept, that we want to show Congress, that we want to show families, that we want to show moms and dads and families that the Department of Education does not need to be here for federal grant aid and federal student loans to continue flowing to borrowers."

Streamlining aid and reducing costs

The administration framed the shift as a way to reduce bureaucracy and improve efficiency. The department reported that federal student loans now total nearly $1.7 trillion, with less than 40% of borrowers in repayment plans and roughly 25% in default.

Gillen said to Fox News, "This will benefit students by streamlining the aid application and student loan repayment processes and save taxpayers money by reducing losses on student loans. Once the move is complete, Education’s biggest budgetary and staffing requirements will be handled elsewhere, which will make it much more feasible to shut down the Department of Education."

Secretary of Education Linda McMahon emphasized the broader reforms in a press release, "Cutting through layers of red tape in Washington is one essential piece of our final mission. As we partner with these agencies to improve federal programs, we will continue to gather best practices in each state through our 50-state tour, empower local leaders in K-12 education, restore excellence to higher education, and work with Congress to codify these reforms."

Proof of concept for closure

Kent detailed the progress over the past year to Fox News Digital, "In over a year, we have reduced the size of the department by over 40%. We have entered into 10 interagency agreements. We have done multiple staff details for other agencies where staff who are in the department are literally physically sitting at other agencies. We are showing Congress and others that this proof of concept works and that we want to continue to work with Congress to memorialize these changes in legislation and with the ultimate goal of closing down the department and putting ourselves out of a job."

With student loan responsibilities shifting to the Treasury, officials contend that a significant portion of the Department of Education’s core functions will operate outside the agency, bringing the federal government closer to what many see as the endgame: a fully dismantled department.
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