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President Donald Trump announced Friday that the Small Business Administration (SBA) will take over management of the country’s $1.6 trillion federal student loan portfolio, removing it from the Department of Education.
“We have a portfolio that is very large, lots of loans, tens of thousands of loans, pretty complicated deal,”Trump told reporters in the Oval Office. “That’s coming out of the Department of Education immediately.”
Trump’s announcement comes a day after he signed an executive order aimed at dismantling the Education Department. Only Congress can unilaterally eliminate the agency.
According to Trump, the SBA is prepared to take over the responsibility and has been awaiting the transition. More than 40 million Americans currently hold federal student loans, and the sudden shift in oversight has raised concerns among borrowers, consumer advocates, and policy experts.
Concerns Over Borrower Protections
The decision to reassign federal student loan servicing to the SBA has sparked concerns about potential administrative errors, borrower privacy risks, and the fate of key programs like Public Service Loan Forgiveness (PSLF).
“The mass transfer of accounts could trigger processing mistakes, jeopardizing repayment plans and loan forgiveness programs,” warned a consumer advocacy group.
Mark Kantrowitz, a leading higher education expert, questioned the selection of the SBA for student loan management, noting that neither the SBA nor the Department of Commerce—another agency Trump considered—has relevant experience in handling student loans.
“The most logical agency would have been the Treasury Department, which already plays a role in debt collection through the Treasury Offset Program,” Kantrowitz said.
What This Means for Borrowers
While the agency overseeing federal student loans is changing, the terms and conditions of existing loans remain the same. Borrowers’ rights, repayment plans, and forgiveness options are protected under federal law and the master promissory note signed at loan origination.
Still, uncertainty looms over how the SBA will manage the transition and whether it will lead to disruptions in loan servicing. As Trump also signed an executive order this week aimed at dismantling the Department of Education, it remains unclear how student loan policies will evolve under his administration.
With millions of Americans relying on federal loans for their education, borrowers are urged to stay informed and monitor any changes in loan servicing and repayment processes as the transition unfolds.
