Trump vs. Department of Education: What Happens To Your Student Loans?

Founded in 1980, the U.S. Department of Education oversees and coordinates national educational policies, programs and initiatives, including federal financial aid. President Trump, in his second term, has pledged to close it down and redirect most of its responsibilities to the states.

Contents

Quick Take: What the Department of Education Does Yes, You’ll Still Have To Pay Your Student Loans Trump Reignites Student Debt Collections Side Note: Eliminating the DOE Would Be ‘Chaos’Final Take To GO

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In these steps to eliminate such a huge government agency, his administration has included making major cuts to the department’s budget, such as $600 million from teacher training programs and $226 million from grants for the Comprehensive Centers Program that provides training and resources for schools and educators.

Recently, the president has held true to his promises and has ordered a plan to dismantle the Education Department while still maintaining its core functions. Additionally, it is rumored that the White House has begun drafting an executive order to terminate the Department of Education altogether, but it has not been carried out yet. When and if it is, it would result in over 42 million federal student loan borrowers who currently owe a debt to the Department of Education and could find themselves wrapped in a lot of administrative red tape and defunding chaos.

So, if Trump eliminates the Department of Education, do you still have to pay your student loans?

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Quick Take: What the Department of Education Does

The U.S. Department of Education administers federal student aid programs such as Pell Grants, direct loans and work-study programs. These initiatives help students afford to attend college and participate in other post-secondary education.

In addition, the agency distributes federal funding to states, school districts and educational organizations to support public schools, higher education and career training. The Education Department also works with state and local governments to implement federal educational laws and initiatives.

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Yes, You’ll Still Have To Pay Your Student Loans

Unfortunately, even if the DOE is eliminated, you will still have to pay all those pesky and expensive student loans. As a borrower, keep in mind that there may be some issues when transitioning from the federal government managing student loans back to a reliance on private lenders or state agencies.

Being at the whim and disposal of private lenders could be a huge risk, especially to new students who haven’t even entered the workforce yet. Without credit scores or a solid salary, banks and financial institutions may not find them creditworthy, which could open up a whole new can of worm-riddled debt.

Trump Reignites Student Debt Collections

Not only will your student loans not be canceled if the Department of Education is dismantled, but starting in May 2025, the Trump administration is restarting forced collections on federal student loans in default, which could include garnishing a portion of your paychecks if you don’t make timely payments. This comes after a five-year break as student loan payments were paused in March of 2020.

With that final blow to your monthly expenses, the last piece of the student loan domino effect has fallen into place. As of today, it’s estimated that more than five million borrowers are in default, and millions of others are close to crossing that line.

Side Note: Eliminating the DOE Would Be ‘Chaos’

Despite President Trump’s promises, it would be nearly impossible for him to eliminate the Education Department, as such a move requires Congressional approval. While Republicans control the White House and Congress, the GOP has a slim five-seat lead (220 to 215) in the U.S. House.

“With a razor-slim House majority and a non-filibuster-proof lead in the Senate, it is highly unlikely that a full-scale elimination of the Department of Education (DOE) could be achieved,” said Bill Townsend, founder and CEO of College Rover. The company provides an online search tool that teaches students and parents more about U.S. colleges and universities.

Townsend said shuttering the DOE would “lead to chaos” because the federal agency administers nearly $2 trillion in student loans.

“There is no mechanism to easily and quickly transfer the $1.7 loan portfolio to another agency, whether that be Treasury, Labor or Justice,” Townsend elaborated. “Compliance, repayment and protection for student loan recipients need to be carefully mapped out. That will not be an easy or quick task.”

Final Take To GO

The bottom line is that if Trump manages to eliminate the Department of Education, do you still have to pay your student loans? The short answer is “yes,” but you will likely pay the loans to a different federal agency, and it may be a bit convoluted when and if these new systems go into place.

Simply put, getting rid of the DOE doesn’t mean the federal government will no longer fulfill its responsibilities. As for now, the law still requires the government to run financial aid programs, such as collecting student loans and enforcing civil rights at schools and campuses, which hopefully holds up.

In the meantime, if you are a current or future student loan borrower, spend loan money only on the essentials, consider less expensive higher education options and borrow as little money as possible.

Kerra Bolton contributed to the reporting for this article.

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