Dismantling Department of Education could cause chaos for Americans with student loans, experts warn

Dismantling Department of Education could cause chaos for Americans with student loans, experts warn

                                                                              

Dismantling the Education Department Could Disrupt Student Loan System, Experts Warn

Former President Donald Trump's executive order on Thursday, initiating the process of dismantling the Department of Education, could create significant challenges for federal student loan programs and millions of borrowers, experts caution.

The Department of Education plays a crucial role in managing student loans for over 40 million Americans, distributing $18 billion in Title I funding for schools in low-income areas, issuing Pell Grants to help students afford college, and overseeing the Free Application for Federal Student Aid (FAFSA), which determines eligibility for grants, loans, and other financial aid.

"It requires significant resources and trained personnel to manage these programs effectively," said Peter Granville, a higher education finance expert and fellow at The Century Foundation, a progressive think tank. "Only the officials at the Department of Education possess the technical expertise needed to ensure borrowers receive accurate information and colleges can properly administer loan programs."

Before signing the order, White House press secretary Karoline Leavitt assured reporters that the Education Department "will be much smaller than it is today" but will continue overseeing student loans and Pell Grants for now. However, Trump administration officials have indicated that these responsibilities will eventually be shifted to another federal agency, such as the Treasury Department, Commerce Department, or Small Business Administration.

"Essential funding will not be cut off for students who rely on these programs," Education Secretary Linda McMahon stated following the order’s signing. "We will work through Congress to ensure a lawful and orderly transition while eliminating bureaucratic inefficiencies."

Despite the administration’s intentions, completely abolishing the Education Department would require congressional approval—a difficult hurdle given that Senate legislation typically needs at least 60 votes to pass.

Concerns Over Administrative Chaos

While the Trump administration aims for a smooth transition, experts warn that transferring oversight of student loans between agencies is a complex task with potential pitfalls. Additionally, the White House has not yet provided a clear roadmap for how student loans will be managed as the department shrinks or which agency will take over its responsibilities.

                                                                           

"You can't just shift a massive, complex student debt portfolio from the Education Department to another agency overnight," said Jessica Thompson, senior vice president at The Institute for College Access and Success. "There’s no indication of a serious, well-thought-out plan for managing this transition."

Granville echoed those concerns, arguing that dismantling the department without a concrete strategy could lead to "chaos and frustration" for the millions of borrowers who depend on federal student loan programs. "This isn’t a formula for efficiency or innovation," he said. "It’s a recipe for disaster."

Trump Administration Cuts Education Department Staff, Raising Concerns Over Student Loan Management

The Trump Administration has already reduced the Department of Education’s workforce by half, eliminating key personnel responsible for managing the nation’s $1.6 trillion in student loan debt. Experts warn that these cuts could lead to significant disruptions for millions of borrowers.

"The department was already understaffed, and with the breadth and depth of last week’s firings, we have major concerns about the ability to serve over 40 million borrowers," said Jessica Thompson, senior vice president at The Institute for College Access and Success.

Thompson highlighted the existing challenges borrowers face, including long wait times when calling for assistance. "We were already in a situation where improvements in customer service were necessary. There is no way you can eliminate institutional expertise at this scale without serious repercussions," she added.

The cuts could create confusion for current and future borrowers seeking guidance on loan payments and repayment options. Without sufficient staff, borrowers may struggle to get clear information, increasing the risk of missed payments and potential loan defaults.

"Now, they can’t call and get advice or answers about their loan payments and whether they can afford them," Thompson said.

Peter Granville, a higher education finance expert at The Century Foundation, echoed those concerns. "We are heading toward another student loan default crisis, but with even fewer resources and commitment to helping borrowers navigate repayment," he warned.

As the Education Department shrinks and its responsibilities shift, experts fear that millions of student borrowers could face mounting financial uncertainty with limited access to support.

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