President Donald Trump and Education Secretary Linda McMahon have reportedly taken the first steps towards dismantling the Department of Education.
While only Congress — not the president — has the power to shutter the department, draft executive order reviewed by CNN last week instructed McMahon to “take all necessary steps to facilitate the closure of the Education Department” while adhering to “the maximum extent appropriate and permitted by law.”
Trump will likely push Congress to pass the necessary legislation later on, though despite reports to the contrary, the president did not sign the order last week.
It comes as almost half of the department’s workforce was terminated on Tuesday.
The Education Department has a variety of responsibilities, including enforcing federal educational laws and conducting education research. But one of its main functions is distributing and regulating federal student financial aid, including federal student loans.
Earlier this month, Trump told reporters that the loan accounts should be overseen by another agency.“I don’t think the Education [Department] should be handling the loans,” he said. “That’s not their business.”
With a shutdown of the department potentially imminent, here’s what we know about how your student loans could be impacted:
What happens to my student loans if the Department of Education closes?
Even if the Education Department shuts its doors, there is no indication federal student loan programs will disappear — and you’ll still need to repay yours, according to Karen McCarthy, vice president of public policy and federal relations at the National Association of Student Financial Aid Administrators.
Instead, another agency — such as the Treasury Department — could absorb the department’s $1.7 trillion loan portfolio if it shuts down.
But such a massive transition could prove disruptive to borrowers, according to McCarthy
“It would be an entirely new undertaking for Treasury, and so if that were to happen, it seems really unlikely that untangling all of that and redistributing the work of federal student aid in the student loan servicing space would proceed either quickly or without any disruptions,” McCarthy told The Independent.
The recent major cuts to the federal workforce could also impact the transition.
“We’re also concerned about the staffing and whether the proper staff would even be available within the Department of Education to assist in making that transition,” McCarthy added.
The Education Department is preparing to send a memo to employees explaining Trump’s executive order is imminent, the Federal News Network reports. The memo adds that officials are identifying the functions “that would be more effectively managed by other agencies.”
“We are to identify which of the Department’s functions, programs, and offices are not mandated by statute, and eliminate them,” the draft memo states, according to the Federal News Network. “This reorganization will impact staff, budgets, reporting, and more — and in coming months, we will determine how it can be accomplished with minimal delay and disruption.”
It isn’t guaranteed Congress will move to close the agency, either. Trump isn’t the first to call for the department to close or merge with another agency, and Congress has historically rejected these bids, CNN reports.
Student loan programs are already facing disruptions
Student loan payment programs are already seeing disruptions as the department’s future is uncertain.
The department previously closed applications for income-driven repayment plans — which allow borrowers to craft affordable repayment schedules and identify paths to loan forgiveness — following a court order. This move could drive millions of borrowers into forbearance or unaffordable plans, Forbes reports.
The federal workforce cuts are also impacting other initiatives including the Total and Permanent Disability Discharge program, which provides loan forgiveness for people with permanent disabilities. The program has been on pause for months due to a servicing platform transition — and while it’s expected to reopen this spring, ongoing cuts could slow it down, according to Forbes.
To prepare for the potential transition, McCarthy says borrowers should update their information with their loan service and get on a feasible repayment plan as soon as possible.
“Any of those paperwork things that you’re dealing with with your loan servicer, if there’s any of that you’ve been putting off…I would absolutely try to get all of those things taken care of,” McCarthy said. “And if you are able to, get yourself into a repayment plan that you anticipate will work for you long term.”
The Independent has contacted the Education Department for comment.
Student debt transfer could lead to further disruptions
Against this backdrop, experts have also warned that transferring the loan accounts of tens of millions of people to another agency would only worsen the lending system, with federal student loan borrowers already complaining of inaccurate bills and being denied relief for which they’re eligible.
“Borrowers and students need more stability, and this would create chaos,” said Michele Shepard Zampini, senior director of college affordability at The Institute For College Access and Success, in an interview with CNBC. It is estimated that the transfer could take months.
This may be exacerbated further by mass layoffs at the department, which have already begun. Late on Tuesday, McMahon reaffirmed that the layoffs were indeed the first step toward shuttering the department.
“Actually, it is, because that was the president’s mandate,” McMahon told Fox News’s The Ingraham Angle. “His directive to me, clearly, is to shut down the Department of Education, which we know we’ll have to work with Congress, you know, to get that accomplished.”
“But what we did today was to take the first step of eliminating what I think is bureaucratic bloat, and that’s not to say that a lot of the folks — you know, it’s a humanitarian thing to a lot of the folks that are there. … They’re out of a job,” she added.
Some 1,315 staffers — around half of the department’s workforce – were terminated on Tuesday, leaving only about 2,183 employees.
“We wanted to make sure that we kept all of the right people and the good people to make sure that the outward-facing programs … the grants, the appropriations that come from Congress, all of that are being met, and none of that’s going to fall through the cracks,” McMahon said on Tuesday evening.
