On Friday, President Donald Trump announced a significant shift in the management of the federal student loan portfolio, indicating that the Small Business Administration (SBA) will take over the responsibility from the Department of Education. This move is part of Trump’s broader strategy to dismantle the Department of Education and redistribute its powers to state governments.
During a press conference held in the Oval Office, Trump stated, “I’ve decided that the SBA, headed by Kelly Loeffler, a terrific person, will handle all of the student loan portfolio.” Additionally, he noted that the Department of Health and Human Services would spearhead funding efforts aimed at supporting students with special needs. This announcement follows a period of uncertainty regarding the management of the federal student loan portfolio, which is valued at a staggering $1.8 trillion—making it larger than all but three banks in the United States.
The transition of the student loan portfolio to the SBA comes alongside expected workforce reductions within the agency. Loeffler revealed that the SBA plans to cut approximately 43% of its workforce, equating to around 2,700 positions. This reduction raises questions about the agency's ability to effectively manage such a vast student loan portfolio, especially considering that nearly 40% of these loans are currently in default.
Reports indicate that the Department of Education has faced challenges in identifying a suitable alternative agency to manage its substantial student debt portfolio. Trump had previously suggested either the Treasury Department or the SBA as potential candidates for this responsibility. However, discussions about transferring the portfolio to the Treasury did not come to fruition, leading to the current decision to assign it to the SBA.
The announcement regarding the SBA's new role comes on the heels of conflicting statements from the White House about the future of the Department of Education’s functions. Just hours before Trump signed an executive order aimed at dismantling the department, White House Press Secretary Karoline Leavitt stated that the agency would retain control over the student loan portfolio. However, as Trump signed the order, he indicated that the department's responsibilities would be preserved and reassigned to other agencies, without providing specific details.
As the SBA prepares to absorb the significant student loan portfolio, experts warn of potential challenges ahead. Loeffler emphasized the SBA’s readiness to collaborate with Congress and the administration to restore accountability to America’s student loan program. Yet, analysts caution that a surge of new defaults could occur as borrowers navigate the end of a multi-year pause on loan payments and adjustments to affordability programs.
One former senior employee of the Education Department highlighted the looming crisis by stating, “It’s a tidal wave coming for an unprepared village.” With the ongoing restructuring and the SBA’s reduced staff, the future management of federal student aid remains uncertain as the nation braces for potential fallout.
This article has been updated to include a statement from Loeffler. CNN’s Kayla Tauche contributed to this report.
