Millions of student-loan borrowers are once again thrown in limbo following President Donald Trump’s plans to dismantle the Department of Education.
One day after signing an executive order to begin the process, Trump announced that student loans would be transferred to the Small Business Administration.
Neither agency provided further detail on what that transfer would look like, including when it’s set to happen. Education Secretary Linda McMahon told Fox News on Friday that she would be working with SBA Administrator Kelly Loeffler on a “strategic plan” for moving student-loan borrowers’ accounts.
“We’ve talked also with Treasury, and how they can be interactive in that process,” McMahon said.
The SBA is responsible for offering resources to small businesses and facilitating major loan programs for business owners, including ones for disaster relief and pandemic recovery.
When asked how these changes will impact student-loan borrowers, the Department of Education referred Business Insider to McMahon’s recent interviews. A spokesperson said that there are currently “no changes for student-loan borrowers to navigate at this time.”
These changes come as millions of borrowers on key repayment plans are waiting for answers. Those on the SAVE plan — which promised cheaper payments — are waiting for a final court decision on the plan’s fate, and Trump also signed an executive order aimed at narrowing the Public Service Loan Forgiveness program, which forgives student debt for government and nonprofit workers after 10 years.
Here’s what student-loan borrowers should know about Trump’s changes to the Department of Education.
What are Trump’s plans for the Department of Education?
Trump’s end goal for the Department of Education is its elimination. His executive order to do so said that McMahon should take all steps to close the department “to the maximum extent appropriate and permitted by law” while ensuring services Americans rely on are “uninterrupted.”
Before signing the executive order, Trump already made moves to reduce the department’s capacity. His administration cut the department staff by nearly 50%, firing over 1,300 of its employees.
Jared Bass, senior vice president for education at the left-leaning think-tank Center for American Progress, told BI that these changes are “like going to a restaurant that’s understaffed.”
“Wait times are long, you may get the wrong order, the service is just bad,” Bass said. “I think that’s going to be the same thing that happens here. Linda McMahon sent home 50% of her staff during the lunch rush.”
Can Trump legally make these changes?
Trump cannot shut down a federal agency or transfer student loans away from the Department of Education without Congress. The Higher Education Act of 1965 states that the education secretary “shall maintain responsibility” for federal student aid programs.
Additionally, shutting down a federal agency requires 60 Senate votes. McMahon has previously acknowledged that she would work with Congress to facilitate the shutdown of the Department of Education. Sen. Bill Cassidy, chair of the Senate education committee, also said in a statement last week that he will be introducing legislation to help Trump accomplish his goal.
What will happen to my student-loan payments?
Student-loan borrowers with payments due should continue making their payments, and those who are on forbearance — either due to legal challenges to the SAVE plan or another reason — should not be facing changes to that, either.
However, some advocates and Democratic lawmakers have sounded the alarm about Trump’s plans’ impact on student-loan servicing.
Jessica Thompson, the senior vice president of The Institute of College Access & Success, said in a statement last week that Trump’s plans “can only result in borrowers experiencing erratic and inconsistent management of their federal student loans. Errors will prove costly to borrowers and ultimately, to taxpayers.”
Can the SBA really handle student loans?
SBA’s Loeffler said in a statement last week that the agency “is prepared to work with Congress and the Administration to bring accountability back to America’s student loan program.”
“As the government’s largest guarantor of business loans, the SBA stands ready to deploy its resources and expertise on behalf of America’s taxpayers and students,” Loeffler said.
The SBA announced, however, that it would be cutting its workforce by 43%. It’s unclear how the agency will manage the trillion-dollar student-loan portfolio with a significant reduction to its staff.
Will there be lawsuits?
Yes. A group of advocacy groups, including the NAACP, the National Education Association, and AFSCME, are filing a lawsuit on Monday to stop Trump’s efforts to dismantle the Department of Education.
“Donald Trump’s own Secretary of Education has acknowledged they can’t legally shut down the Department of Education without Congress,” Aaron Ament, president of Student Defense — one of the groups representing the plaintiffs — said in a statement. “Yet that is, for all intents and purposes, exactly what they are doing. It’s a brazen violation of the law that will upend the lives of countless students and families.”
Have a tip or story to share? Contact this reporter via Signal at asheffey.97 or via email at asheffey@businessinsider.com. Use a personal email address and a nonwork device; here’s our guide to sharing information securely.
Read the full article here
