The Trump administration has moved a major piece of the federal student loan system out of the Education Department and into the Treasury Department, shifting oversight of collections on defaulted loans effective immediately. Under an interagency agreement announced Thursday, the Washington Post reports, Treasury will take over the Default Resolution Group, which manages collections for nearly 6 million borrowers who owe more than $120 billion. It's the 10th interagency agreement the administration has enacted to move major responsibilities out of the Education Department, which President Trump wants to shut down, per NPR.
Running the student aid office is one of the department's core functions. The administration described the change as the first of three stages that would move its traditional functions—including work on loans in good standing and handling of the federal aid application—to Treasury. A timetable has not been announced for the later phases, per the Post. Education Secretary Linda McMahon said the department has mishandled student aid programs and argued that Treasury, which already disburses federal student loan funds and intercepts tax refunds for unpaid debts, is better positioned to run collections at a time when close to a quarter of federal borrowers are in default.
Democratic lawmakers, unions representing Education Department employees, and student advocates say the move risks further complicating repayment for borrowers, especially those already in default, just as the agency prepares to roll out a new repayment plan and a fresh path out of default under the One Big Beautiful Bill that Trump signed in July. Opponents argue the shift diminishes education-specific expertise and sidesteps legal requirements keeping student aid programs in the department, with Rachel Gittleman of the American Federation of Government Employees Local 252 calling the change harmful to borrowers and a setback for federal oversight.
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