With the U.S. Department of Education in the crosshairs of the Trump administration, the way millions of young Americans interact with the higher-education system could be about to change.
Newsweek spoke with multiple experts who explained what the changes could mean for students and student loans.
Why It Matters
During his 2024 campaign, President Donald Trump frequently vowed to dismantle the Department of Education, claiming it has been taken over by “radical zealots and Marxists.” He argued that its authority should be handed over to the states.
The Department of Education, which according to its website employs more than 4,000 people, managed $1.5 trillion in federal loans for nearly 43 million borrowers as of January 2024.
What To Know
Loan Servicing Disruptions
The Department of Education currently manages the federal student loan system through its Office of Federal Student Aid (FSA), which handles loan disbursement, servicing and borrower assistance.
If the department were abolished, these functions might need to be transferred elsewhere, such as the U.S. Department of the Treasury, as Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, which provides free student loan advice, suggested to Newsweek.
But some experts, such Mark Kantrowitz, who writes extensively about financial aid policy, warned that there had been past attempts to have the Treasury Department directly manage student loans, and they were “not as effective” as private contractors.
Federal Aid Programs Could Be Eliminated or Reassigned
Another concern is the fate of federal financial aid programs such Pell Grants, work-study programs and subsidized loans.
The department says it awards more than $120 billion a year in grants, work-study funds, and low-interest loans to approximately 13 million students.
“The Federal Pell Grant will be fine, with colleges continuing to draw down funds directly based on the student’s FAFSA-calculated eligibility,” Kantrowitz said.
“But, if the grants were eliminated, which would require an act of Congress, low-income students would no longer be able to afford to pay for college.”
Borrowers Might Be Forced Into Private Loan Market
If the federal government reduces its role in student lending, private lenders could step in to fill the gap, which experts warn would potentially make college less affordable.
“ We have seen significant alignment between the administration’s actions and what was in Project 2025. That document says the federal government should get out of the student loan business entirely. That would send student loans to the private market, which would be terrible for students from low-income families,” Peter Granville, a fellow at The Century Foundation where he analyzes federal and state policy efforts to improve college access and affordability, told Newsweek.
“The incentive structure of student loans would drive lenders towards maximizing profit, not promoting education access. Moving the department’s offices to other federal agencies is one thing, but the administration’s leaders have signaled that they want to privatize the loan program, which would be an even greater mistake.”
States Could Take Over Some Responsibilities
One key argument for dismantling the Department of Education is to give states more control over education policy and funding. Under this model, student aid programs might be shifted to state governments, creating a patchwork system where eligibility and funding levels vary widely.
“The states lack the capacity to fully take over servicing of federal loans. They want a piece of the pie, but not the entire pie,” Kantrowitz said. “The larger loan servicers are more effective and efficient than the states.”
Potential Challenges
Even if the Republican administration pursues abolishing the Department of Education, it would face significant legal and political hurdles. The department was established in 1979 during the Carter administration and dismantling it would require new legislation. However, reports suggest an executive order is in the works to cut the department.
Granville also anticipated a period of confusion and upheaval.
“ I wouldn’t bet that that transition will go smoothly without significant confusion for families, colleges and student loan borrowers. Higher education is a massive part of American life,” Granville said.
“ There are thousands of colleges who turn to the department not only for student aid programs but also for guidance about things such as enforcing civil rights and programs for veterans.”
Oversight of colleges could also be affected, Kantrowitz said, since the Department of Education runs program reviews and audits. Funding delays are also a possibility.
“Any major changes would likely cause some chaos and disruption,” said Kantrowitz, who said we could also expect an increase in default rates, since default prevention would be affected.
What People Are Saying
President Donald Trump said last October: “We want federal education dollars to follow the student rather than propping up a bloated and radical bureaucracy in Washington, D.C.”
Elon Musk wrote on X, formerly Twitter, on Monday night: “Reagan campaigned on ending the federal Dept of Education, which was created by Carter in 1979, but it was bigger when Reagan left office than when he started! Not this time. President @realDonaldTrump will succeed.”
Mark Kantrowitz told Newsweek: “The U.S. Department of Education is a very complicated enterprise, with the federal student loan portfolio the equivalent to the world’s largest bank. Shutting it down would be very complicated.
“The idea of moving fast and breaking things might work for a startup, but not for a service that people depend on. Some things would be permanently broken and even a temporary disruption can be harmful.”
What Happens Next
According to reports, the Trump administration is considering using an executive order to dismantle the Department of Education.
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