In a sweeping move to reshape federal education policy, President Trump has initiated plans to dismantle the Department of Education, transferring student loan management to the Small Business Administration and leaving millions of borrowers facing uncertainty.
At a Glance
- DOE Set for Closure: Executive Order aims to dismantle the Department of Education
- SBA to Oversee Loans: Student loan management to shift to Small Business Administration
- Repayment Plans Halted: Enrollment in key repayment plans suspended
- Forgiveness Programs Cut: Public Service Loan Forgiveness faces significant restrictions
- Legal Challenges Emerge: Lawsuits filed against administration’s education policies
Trump Moves to Dismantle Education Department
President Donald Trump has issued an Executive Order to begin dismantling the U.S. Department of Education, a decision that would shift key responsibilities, including management of the federal student loan system, to other federal agencies. Chief among those is the Small Business Administration, which would inherit oversight of a $1.6 trillion loan portfolio, according to reporting from CNBC.
Linda McMahon, current SBA Head and former WWE executive, is reportedly leading the transition plan. The administration claims this move will empower states and parents by decentralizing control of education. However, education experts warn that transferring such a massive loan infrastructure to an agency with no student aid experience could trigger widespread servicing disruptions.
Watch CNBC’s report on the incident at Trump Hands Student Loans, Disability Programs to Other Agencies.
Borrowers Caught in the Crossfire
In tandem with the agency overhaul, the administration has also frozen access to several income-driven repayment plans. The Saving on a Valuable Education (SAVE) plan, created under the Biden administration to lower monthly payments and provide forgiveness after 10 to 20 years, has effectively been blocked. “It’s difficult to see any scenario where SAVE will survive,” said Scott Buchanan of the Student Loan Servicing Alliance, speaking to CNBC.
Public Service Loan Forgiveness has also been sharply curtailed. Borrowers are no longer guaranteed forgiveness after 10 years in qualifying nonprofit or government work. The decision to eliminate automatic cancellation under plans like Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) further narrows relief options. As Forbes explains, these shifts could result in many borrowers carrying student debt into old age, particularly those on fixed incomes.
Legal Blowback and Political Stakes
The National Consumer Law Center has warned that without income-based relief, low-income borrowers may face decades of payments with no end in sight. “Under this proposal, many low-income borrowers would be saddled with paying student loan debt for the rest of their lives,” the group said in a statement published by Forbes. Alpha Taylor, a senior attorney with the center, added that the changes would hurt older Americans living on Social Security benefits.
Multiple lawsuits have already been filed. Plaintiffs argue that halting promised forgiveness and blocking access to repayment plans is both legally and financially devastating. The 8th Circuit Court of Appeals has also weighed in, stating the Education Secretary had “gone well beyond this authority” by creating systems where loans were “largely forgiven rather than repaid.”
Supporters of the reform argue the system was long overdue for disruption. In an op-ed for The Western Journal, Latino conservative activist Betty Cardenas wrote, “President Trump has the opportunity—and the authority—to fix it,” calling the DOE “an unaccountable monolith” that wastes taxpayer funds.
As litigation unfolds and the SBA braces to absorb the nation’s student loan apparatus, millions of Americans await clarity on what these sweeping changes will mean for their educational and financial futures.
