What The Student Loan Shift To The Treasury Means For College Students

College students are no strangers to student loans. Recent data from the Education Data Initiative showed that 28% of all undergraduate students take out federal loans; the average public university student will borrow more than $30,000 to achieve a bachelor’s degree. And even if you haven’t taken out loans and don’t plan to, I’m sure you’re still constantly being bombarded by emails encouraging you to take out loans. (Who among us hasn’t had Sallie Mae or Niche slide into your inbox, offering you the most amount of money with the lowest interest rates in the hopes that you’ll choose to get your loans from them?) 

All of this to say, no matter your personal financial situation, student loans are endemic to the college experience. And, no matter your personal financial situation, understanding the most recent federal changes to the management of student loans is absolutely crucial.

On March 19, the Trump administration announced an interagency agreement to shift the management of the U.S.’s federal student loan portfolio from the Department of Education (ED) to the Department of the Treasury (Treasury).

“The Federal Student Assistance Partnership marks an intentional and historic step toward breaking up the Federal education bureaucracy and dramatically improving the administration of Federal student aid programs that millions of American students, families, and borrowers rely on to access higher education,” said U.S. Secretary of Education Linda McMahon in the ED’s press release about the agreement. 

Critics of this plan point out that transferring responsibility to the Treasury is just another step in Trump’s plan to fully dismantle the ED. Already, the dismantling has led to large-scale layoffs, the destruction of educational programs, and a loss of support for both educators and students.

This interagency plan will take place in phases. First, the Treasury will take responsibility for collecting on defaulted federal student loans. Along with this, the Treasury will become responsible for the Federal Student Aid’s (FSA’s) Default Resolution Group, which offers support to defaulted borrowers. Next, the Treasury will begin to support FSA’s other portfolios, including non-defaulted loans. Finally, this interagency agreement plans for the Treasury to be involved in the administration of the FAFSA and Pell Grant distribution, though exact details and implementation plans are not yet known.

As this plan goes into effect, college students may find themselves wondering how they factor into all of this.

What does this mean for college students?

Well, it depends. 

First, according to the Trump administration, those borrowing money will continue to borrow and repay their loans as normal. They don’t need to change their loan provider or the way they pay back on their loan. Those who know they’re in default should visit the government’s Debt Resolution website to get an overview of their defaulted loans.

While the Trump administration has decided to hold off on involuntary debt collection — such as wage garnishing or federal tax refund withholding — those who are in default should contact their loan provider to apply for loan rehabilitation to address the concern proactively. 

If you’re currently enrolled in the Saving on A Valuable Education (SAVE) plan, there’s some bad news. While the SAVE program allowed student loan holders to make smaller payments on loans, the Trump administration is seeking to end the program, with a total phase-out of SAVE planned for the summer of 2028. For those currently enrolled in SAVE, now is the time to start seeking out alternative payment programs such as income-based repayment. Regardless what plan you move to, you’ll likely end up paying more money per installment. 

What does this mean for the future?

There’s a lot of unknowns when it comes to navigating the future of student loans. The Trump administration has a lot of plans for the ED that could further shake up how students borrow and repay educational money. With limits on how much students can borrow and stricter repayment, it does appear that financing higher education is going to get harder before it gets easier as everyone tries to adjust to the new federal standards. 

Keep in mind, though, student loans and financing are incredibly dependent on political administrations. So, it’s entirely possible that with the election of the next president, there will be a host of additional changes — whether they’re good or bad might depend on your own specific situation. 

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