WASHINGTON — The U.S. Treasury Department will take over the Department of Education’s responsibility for collecting on defaulted federal student loan debt, President Donald Trump’s administration announced Thursday.

It’s the first step in a multi-phase process that will end with Treasury taking on the entire federal student loan portfolio. It’s also the latest interagency agreement announced by the Education Department. 

A senior Department of Education official cited the agency’s “longstanding partnership” with Treasury in administering federal student aid programs and expressed confidence that the department was in a good position to increase its role. 

The administration continues to take sweeping steps to do away with the 46-year-old Education Department, as Trump seeks to return education “back to the states.” That effort comes despite much of the oversight and funding of schools already occurring at the state and local levels. 

In the first phase, Treasury will also “provide operational support” to the Education Department’s efforts to return borrowers to repayment, per the announcement. 

The Education Department’s student loan portfolio stands at roughly $1.7 trillion. The agency says fewer than 40% of borrowers are in repayment and nearly a quarter are in default. 

In later phases, Treasury is set to “work to provide operational support over non-defaulted Federal student loan debt, to the extent practicable and permitted by law, while also seeking opportunities to provide operational support to FSA’s other functions.” 

The senior Education Department official said that borrowers currently making payments “should see no change” and can expect to see “better customer service.” 

Department forges multiple agreements

U.S. Education Secretary Linda McMahon said that “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,” in a statement Thursday. 

The Education Department has announced nine other agreements with the departments of Labor, Health and Human Services, Interior and State that transfer several of its responsibilities to those agencies. 

Meanwhile, the U.S. Supreme Court in July 2025 temporarily greenlit mass layoffs and a plan to dramatically downsize the Education Department ordered earlier that year. Those layoffs inflicted a heavy hit on Federal Student Aid, among other units at the agency.  

That plan was outlined in a March 2025 executive order that called on McMahon to “take all necessary steps to facilitate the closure” of her own department.

‘Irresponsible, reckless’ 

Sen. Patty Murray of Washington state, the top Democrat on the Senate Appropriations Committee, said that “instead of helping student borrowers get the support they need, Secretary McMahon is focused on illegally hollowing out the department she leads and creating new, harmful bureaucracy while she’s at it,” in a statement Thursday.

“Despite all this administration’s talk about creating efficiency, the fact is these agreements simply create pointless new red tape — while threatening basic services and support that students depend on every day,” Murray added.

Rachel Gittleman, president of American Federation of Government Employees Local 252, which represents Education Department workers, lambasted the announcement Thursday.

Gittleman described it as “an insult to the nearly 43 million Americans with federal student loan debt and to the taxpayers who depend on federal oversight to prevent waste, fraud and abuse.”

Gittleman noted that since McMahon took over, “the agency has fired or pushed out nearly half of Federal Student Aid’s workforce, leading to the Government Accountability Office warning that the majority of federal student loan servicers running the government’s $1.7 trillion student loan portfolio have been repeatedly breaking the law without staff oversight.”

The GAO report found that the staffing reductions affected the government’s ability to determine how well student loan servicers are doing their jobs.

Aissa Canchola Bañez, policy director for the advocacy group Protect Borrowers, blasted the administration’s move as “irresponsible, reckless, and bad news for our most vulnerable student loan borrowers.”

She added that “in the midst of a growing affordability crisis where American families are already struggling to make ends meet, this risks driving millions of borrowers further into financial hardship.” 

WASHINGTON — U.S. Senate Democrats and education advocates Wednesday marked one year since the U.S. Department of Education initiated sweeping mass layoffs.

Those layoffs set the stage for more unprecedented efforts from President Donald Trump’s administration over the past year to wind down the 46-year-old agency as part of his quest to return education “back to the states.” 

Meanwhile, a new report from the nonpartisan Government Accountability Office found that the staffing reductions affected the government’s ability to determine how well student loan servicers are doing their jobs.

Hawaii Sen. Mazie Hirono hosted the press conference outside the U.S. Capitol, joined by fellow Democratic Sens. Dick Durbin of Illinois and Chris Van Hollen of Maryland, along with advocates, to underscore the impact of the mass layoffs and other major cuts on students and families across the country. 

The U.S. Supreme Court in July 2025 temporarily greenlit the mass layoffs, along with Trump’s plan to dramatically downsize the agency, which he had outlined in an executive order signed later in March 2025. 

Rachel Gittleman, president of American Federation of Government Employees Local 252, which represents Education Department workers, said the administration “has shown it will stop at nothing, even ignoring court orders and violating federal law to dismantle the department and sow chaos for students, families, communities and my coworkers.” 

“They will continue to undermine the careers of thousands of dedicated public servants who work every day to support our students and families,” Gittleman added.

The March 2025 Reduction in Force, or RIF, effort, hit wide swaths of the agency, taking heavy hits to units such as the Office for Civil Rights and Federal Student Aid. 

Student loans

Two Government Accountability Office reports — including the one released Wednesday — underscored the impact of the staffing reductions at these two units on the department’s abilities to carry out its key responsibilities. 

In February 2025, FSA “stopped assessing student loan servicers on accuracy and call quality due to lack of staff capacity,” the government watchdog reported.

Between January and December 2025, the department saw a drop in 656 staffers at FSA, according to the report.  

“By not assessing servicer accuracy and call quality, FSA lacks assurance that borrower records are correct and that servicers are giving borrowers quality information,” according to the GAO report.

Civil rights

Another GAO report, released in February, found that the Education Department spent between roughly $28.5 million and $38 million on the salaries and benefits of the hundreds of OCR employees not working between March and December 2025, who were put on paid administrative leave while legal challenges against the administration unfolded. 

The government watchdog found that despite the department resolving more than 7,000 of the over 9,000 discrimination complaints it received between March and September, roughly 90% of the resolved complaints were due to the department dismissing the complaint.

The agency later moved to rescind the RIFs against the OCR employees in early January while legal challenges proceeded. 

“So they wasted taxpayer money while they also tried to undermine the laws of the United States that guarantee civil rights to every student,” Van Hollen said during Wednesday’s press conference.  

Interagency agreements 

Members of Congress and advocates also pushed back against the Education Department’s several interagency agreements with other departments, which transfer many of its responsibilities to Labor, Health and Human Services, Interior and State.

The department has clarified in fact sheets regarding the agreements that it would “maintain all statutory responsibilities” and oversight of the programs involved. 

The effort has drawn strong backlash from Democratic members of Congress, labor unions and advocates.

“Trump is setting these programs up to fail,” Hirono said, adding that by “shoving these programs to departments that do not have the experience or wherewithal to run these programs, he is setting these programs that our kids rely on (up) for failure.” 

Funding increase

Meanwhile, Congress earlier this year rebuked a request from the president to dramatically slash funding for the department as he and his administration seek to dismantle it. 

Trump signed a measure in February that funds the department at $79 billion this fiscal year — roughly $217 million more than the agency’s fiscal 2025 funding level and a whopping $12 billion above what Trump sought.

The spending package does not provide ironclad language to prevent the outsourcing of the department’s responsibilities, but it does direct the department and the agencies part of the transfers to provide biweekly briefings to lawmakers on the implementation of any interagency agreements.

The department did not respond to a request for comment Wednesday.