An anxious atmosphere envelops the American flag and the U.S. Department of Education flag fluttering in front of its building in Washington, D.C. It’s February 2025, and with the Trump administration considering the closure of the U.S. Department of Education, a great deal of uncertainty looms for the nation’s 42 million federal student loan borrowers.
The Department plays a crucial role in managing federal student loans, a necessity for millions attending college and graduate schools each year. Currently, it oversees a staggering $1.6 trillion in student debt nationwide.
"Borrowers are understandably on edge at the moment," says Betsy Mayotte, President of The Institute of Student Loan Advisors, a nonprofit dedicated to assisting borrowers with loan repayment strategies.
Any closure of the Education Department would require Congressional approval, but reports from The Wall Street Journal indicate that Trump administration officials are exploring ways to halt parts of its operations through executive orders. During his campaign, President Trump emphasized prioritizing the shutdown of the Department of Education.
A spokesperson from the White House explained, "The President aims to fulfill a campaign promise by reassessing the Department of Education’s future."
This discussion aligns with broader financial developments: from potential tariff impacts on U.S. consumers to the Federal Reserve’s decision to maintain interest rates and the IRS’s announcement setting the 2025 tax season in motion.
Established by former President Jimmy Carter in 1979, the Department of Education has faced existential threats before, including proposals for its dissolution by former President Ronald Reagan and attempts by Trump during his first term to merge it with the Labor Department.
The Trump administration’s pursuit to dismantle the Department is facing significant opposition. A recent poll conducted by Data for Progress for the Student Borrower Protection Center and Groundwork Collaborative reveals that 61% of likely voters do not support using executive orders to abolish the department, while only 34% are in favor. This poll surveyed 1,294 people from January 31 to February 2.
Let’s delve into what these potential changes mean for student loan borrowers.
What would happen to my student loans?
Even without the Department of Education, borrowers will still owe their debts, says Mayotte. "Changing the managing entity does not alter the loan’s terms," she asserts, likening it to the process where mortgages are sold to different companies—a scenario many student loan borrowers have already experienced with servicer changes.
Mayotte speculates that the Treasury Department could step in to manage student debt, or perhaps even the Justice Department or the Department of Labor could assume some of the Education Department’s responsibilities, as suggested by the National Association of Student Financial Aid Administrators.
Meanwhile, some Republicans see an opportunity to push for privatizing the federal student loan system, a move that worries consumer advocates. These groups emphasize that students require protections not typically offered by private lenders, notes financial aid expert Mark Kantrowitz.
Michele Shepard Zampini, senior director of college affordability at The Institute For College Access and Success, voices concerns about the existing issues within the federal student loan system. Moving the loan accounts of millions to another agency could exacerbate problems, she warns. "Borrowers and students need stability, and this change would create disorder," Shepard Zampini says.
Financial aid for new and current students could be delayed
For students dependent on financial aid to access college, a partial or complete closure of the Education Department could spell delays, notes Shepard Zampini. "It’s a significant concern for families," she emphasizes, lamenting the unfortunate reality that "people can’t attend college without student loans."
Kantrowitz echoes these sentiments. "Disruption is detrimental, very detrimental," he confirms, cautioning that during any transition, federal student aid might be delayed for an extended period, leaving students in the lurch.
