Student loans moving to Treasury, expert says ED shutdown closer

The Department of Education (ED) just took a big step closer to shutting down.

The Trump administration announced on Thursday an interagency agreement between the ED and the Treasury to move student lending operations to the Treasury, which will “assume operational responsibility for collecting on defaulted Federal student loan debt and provide operational support to ED’s efforts to return borrowers to repayment,” the ED said in a release. 

“I think we’ve been very clear about this last week that this is a multiphase process,” Nicholas Kent, Undersecretary of Education, told Fox News Digital on Monday.

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Throughout the 2024 campaign, then-candidate Donald Trump promised to eliminate the Department of Education and signed an executive order directing his administration to start disbanding it. 

“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, 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,” Kent said.

Andrew Gillen of the Cato Institute told Fox News Digital that this particular shift in responsibilities is significant because previous interagency agreements have been “relatively small.”

“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,” Gillen said.

“I think that that’s absolutely right,” Kent said in agreement with Gillen’s analysis. “Characterizing it as the next and largest step toward winding down the Department of Education is absolutely the right way to think about it.”

This interagency agreement follows the Trump administration’s effort to shift power from a handful of its offices and programs to other federal agencies as it works to dissolve the federal department completely.

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“Cutting through layers of red tape in Washington is one essential piece of our final mission,” Secretary of Education Linda McMahon said in a press release. “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.”

The department added that shifting student loan responsibilities to the Treasury will “mitigate the continuing fallout and cost to taxpayers from the Biden Administration’s mismanagement of the Federal student loan portfolio, and facilitate the return of defaulted borrowers to repayment.”

The total of student loans owed is at nearly $1.7 trillion, according to the department. It said less than 40% of borrowers arrange a repayment plan and almost 25% of them are in default.

“This will benefit students by streamlining the aid application and student loan repayment processes and save taxpayers money by reducing losses on student loans,” Gillen told Fox News Digital. “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.”

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The ED has made “historic progress in such a short period of time,” according to Kent. 

“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,” he said. “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.”