White House officials said the Education Department will manage the student loan program the day after President Donald Trump announced that the Small Business Administration would take over the $1.7 trillion investment portfolio.
He told White House reporters that the move would happen “immediately”, although he did not disclose how the process would work. Currently, federal law requires education departments to manage student loans, so the president has no authority to take action.
Neither the White House nor the Small Business Administration responded to requests for comment.
To answer questions about how loans to SBAs work, the Education Department referred Internal Advanced ED Enjoy an interview with Fox News on Friday, Education Secretary Linda McMahon. McMahon said she is working with the SBA to develop a strategic plan.
The announcement comes after Trump’s executive order signed Thursday, directing McMahon to “close her department to the greatest extent of the law.” McMahon and others said a smaller version of the department would focus on core functions, which many experts believe includes student loan programs. (Trump also said Friday that the Department of Health and Human Services will take over programs to support students with disabilities.)
Kelly Loeffler, who leads the SBA, wrote on social media that her institution is “prepared to lead the restoration of accountability and integrity in the U.S. student loan portfolio.” Whether the ministry has the ability to participate in the program is an open question; Loeffler plans to cut 43% of its staff, politics There are other news media reports. SBA runs several programs to support small businesses, including providing loans and aiding in disaster recovery.
The education department issues about $100 billion in student loans each year and pays $30 billion in Pell grants. This funding is crucial for students who rely on the government to help college payments.
But for years, borrowers have struggled to drive the hassle of student loan systems and often have difficulties in repaying their loans. Meanwhile, the growing federal loan portfolio has become a key issue for both legislators on both sides of the political aisle. Former President Joe Biden’s solution is partly to make student loan forgiveness easier to obtain and make loan payments more affordable.
Trump said Friday that the loan system “will be much better than the services in the past,” he added, “It’s a mess.”
Agents turn a blind eye
On Friday afternoon, whether the SBA will also take over the Pell Grant program and free federal student aid applications, the form of federal, student and institutional aid millions rely on. Currently, the Federal Student Aid Office is part of the Education Department to manage these programs. The office’s recent massive layoffs in the department have been hit hard, with experts questioning whether it can fulfill many of its responsibilities, including overseeing universities and deprivation of fraud in the federal student aid system.
Trump’s executive order states that the education department manages Wells Fargo’s sized portfolios but has much fewer employees. “The Department of Education is not a bank, it must return the banking function to an entity equipped to serve American students,” the order said.
The official high office of federal student aid said Friday that the office announced it was being subjected to blind view. Just one day ago, the plan was to transfer loans to the Treasury Department, officials said. The official said agency officials have not received any plans or communications about handing over the Ins rope to the SBA.
“Obvious violation”
Federal regulations that create the FSA specifically give the office a mandate to manage student financial aid programs. Additionally, laws that decide how to allocate federal funds explicitly send money to the education department for student aid programs. A former department staff member told Internal Advanced ED The government “if you are going to turn to functions, it clearly stipulates the spirit and intention of the law.”
Senator Patty Murray, a Democrat from Washington, agreed on social media that the announcement “apparently violates education” [and] Appropriation law. ”
Beth Maglione, interim president of the National Association of Student Financial Aid Administrators, added in a statement that only Congress can move the student loan portfolio to other institutions; if the legislative department agrees, it will take time.
“The government first needs to articulate a definite strategy outlining how to allocate work for student aid programs in the SBA, identify the necessary staffing and resources, and build the necessary infrastructure to facilitate the transition of these programs to another federal agency,” she said. “In the absence of any comprehensive program, there is still a serious concern: how to perform such restructuring without disrupting students and institutions?”
Not a “crazy idea”
Some Conservative policy experts who support the closure of the department are cheering for this move. “In Ed’s student loans, the institution will have little left for student loans. There are only a few plans – certainly not enough to justify cabinet-level agencies,” wrote Lindsey Burke, director of the Center for Educational Policy at the Heritage Foundation.
Beth Akers, senior researcher at the American Corporate Academy Internal Advanced ED There are many open questions about the operation of the SBA sports. But the news, she said, suggests that the Trump administration has learned that the recent layoffs of staff “may make it too difficult to properly manage these procedures,” she wrote.
Akers noted that since the SBA is currently managing its own loans, “it’s not a crazy idea that they can achieve that.”
“Frankly, the department handles the Student Loan Administration poorly, so the scope of standard-level composition improvements is low,” she added. “I hope that the existing student loan infrastructure (and the remaining staff) may be transferred to the SBA and that the way these programs run will not change immediately. That’s my hope. Because if things change too quickly, I hope that students will see disruptions that may affect their enrollment and personal financial status.”
