Trump’s Department Of Education Executive Order
President Donald Trump signed an executive order at the White House initiating action to “begin eliminating the Department of Education, once and for all.” This unprecedented move comes despite legal limits requiring an act of Congress to abolish the Department entirely. “We are going to shut it down and shut it down as quickly as possible,” Trump said at Thursday’s event.
Trump did not say anything specific about the student loan program, but earlier in the day his press secretary, Karoline Leavitt, said, “the Department of Education will be much smaller than it is today,” according to The Hill. “When it comes to student loans and Pell grants, those will still be run out of the Department of Education” What does this mean for student loan borrowers, who depend on the Education Department to administer $1.6 trillion in federal loans for roughly 43 million Americans?
Borrower advocates and experts are sounding alarms about the significant fallout this executive order could have on everyday borrowers both in the short- and long-term. Chief among the concerns are potential repayment delays, chaos for loan servicers, and a state of limbo for critical loan forgiveness programs that millions rely on. “The anxiety levels are pretty high for borrowers right now,” Betsy Mayotte, president of The Institute of Student Loan Advisors, told CNBC. With the Department of Education starting the preparation to wind down operations, student loan holders may be bracing for repayment disruptions, possible pauses or errors in programs like Public Service Loan Forgiveness, and a new wave of servicing headaches on top of an already strained system.
Department Of Education Fallout: Student Loan Repayment Delays And Loan Servicer Chaos
If Trump’s executive order comes to fruition and the Department of Education shuts down, it would require transferring the department’s responsibilities elsewhere, which could lead to massive disruptions in processing student loan payments. The department’s Office of Federal Student Aid typically coordinates closely with loan servicers to credit payments, manage income-driven repayment updates, and guide borrowers out of default. With the department in upheaval, servicers may face a leadership void and unclear directives.
Routine tasks may stall – from updating income recertifications for income-driven repayment plans to processing monthly payments and default rehabilitation paperwork. “Borrowers and students need more stability, and this would create chaos,” notes Michele Shepard Zampini of The Institute for College Access & Success in a CNBC interview, emphasizing that the federal student loan system is already “plagued by problems” and that ultimately moving tens of millions of borrower accounts to a new agency would only worsen the turmoil.
Indeed, the loan repayment system was under strain even before this executive order. When federal payments resumed in late 2023 after a long pandemic pause, the resumption was described by lawmakers as a chaotic process riddled with servicer errors. Borrowers reported lost paperwork, inaccurate billing, and hours-long hold times seeking help. If those issues occurred with the Department of Education at the helm, advocates fear a far more disordered scenario now. “Disruption is bad, very bad,” higher-education expert Mark Kantrowitz warned to CNBC, noting that during a significant transition, vital processes like federal student aid disbursements or payment postings “might not become available for weeks or longer.” In other words, an administrative shake-up of this scale could mean payment delays, misapplied payments, or even inadvertent delinquency notices for borrowers who have been diligently paying.
While federal student loans may remain with the Department of Education in the short term, Trump’s remarks about shutting down the department as quickly as possible raise the question of who will ultimately manage the federal student loan program. The Department of Education currently oversees a $1.6 trillion loan portfolio and is the hub for repayment programs, according to The Wall Street Journal. Proposals floated by conservative groups suggest shifting these functions to the Treasury Department. However, whether the Treasury or any other agency would be prepared to absorb the complex machinery of student loan servicing remains doubtful. Even if Congress and the administration eventually settle on a new home for Federal Student Aid, the transition period is perilous.
In practical terms, that could translate into botched payment records and confusion about where borrowers should send their checks when they are due. Both borrowers and loan servicers may be left in the lurch.
With their federal partner on the path to closing shop, servicers could face operational chaos: payment files might not transmit on time, forgiveness applications could sit unattended, and error resolution processes may freeze. It doesn’t help that millions of borrower accounts have already been shuffling between servicers in recent years due to contract changes. “Just because the entity that manages the loan changes, it in no way changes the terms of the loan,” Mayotte explained in her CNBC interview – borrowers will still owe what they owe.
However, if those managing entities are in disarray, borrowers could experience a breakdown in the day-to-day management of their loans. Expect possible delays in processing automatic debit payments, longer turnaround for deferment or forbearance requests, and confusion over who is accountable if something goes wrong. In short, the orderly rhythm of repayment that borrowers count on is at serious risk of being thrown off-beat.
Department Of Education Fallout: Student Loan Forgiveness Programs In Limbo
Trump’s executive order to begin eliminating the Department of Education raises frightening questions for borrowers pursuing loan forgiveness programs like Public Service Loan Forgiveness or enrolled in income-driven repayment plans (including the SAVE plan). These programs require continuous administration – tracking borrowers’ payments and employment, certifying eligibility, and eventually approving loan discharge after the required time. With the Department of Education in flux, borrowers worry that forgiveness timelines will freeze or derail.
Take PSLF, which promises loan cancellation after ten years of qualifying public-service work and payments. Over the last few years, PSLF has gained momentum – nearly 1 million borrowers have received about $70 billion in debt relief thanks to recent expansions and fixes. And many more are in the pipeline: an estimated 3.6 million public service workers nationally could be eligible for PSLF in the coming years, representing more than $250 billion in potential forgiveness.
Those benefits hinge on a functioning system to process certifications and approve forgiveness. If the Department of Education‘s PSLF unit is dismantled or its staff dispersed, the program could effectively grind to a halt. Borrowers who have made years of payments may suddenly find no one at the federal level to receive their forgiveness applications or count their remaining payments. Many borrowers are likely anxious that decades of promised relief could vanish if the program’s custodians inside the DOE are sidelined. Even if a shell of the program remains in place, a leaderless Department or a hasty transfer to another agency could create significant operational barriers. In effect, PSLF would be in limbo – still on the books but barely functional.
Similar concerns apply to Income-Driven Repayment plans, including the Biden administration’s new SAVE plan. These plans forgive any remaining balance of qualifying payments after 20–25 years (or even 10 years for some smaller undergraduate debts under SAVE). They also require annual income recertifications and a careful accounting of each month a borrower makes (or misses) a payment. Right now, between seven and eight million federal borrowers are enrolled in IDR plans and many were expecting eventual cancellation of their balances. The Department of Education just this year began implementing a one-time adjustment to give borrowers credit toward IDR forgiveness for past periods of deferment and forbearance – an initiative set to immediately forgive loans for 804,000 long-time borrowers (roughly $39 billion in debt) due to past servicing failures, according to ABC News.
If the Department of Education‘s student loan operations stall, so could this relief. The fate of the SAVE plan is similarly murky. This new IDR option, which boasts more generous terms, needs active oversight to enroll borrowers and apply monthly interest subsidies. Yet Trump’s order leaves officials charged with running SAVE in flux.
Put simply, borrowers pursuing forgiveness face uncertainty like never before. Many had structured their careers and finances around these federal promises – taking public-sector jobs, sticking to income-based payments, or consolidating loans – expecting that the Department of Education would honor its bargain. Now, those expectations are clouded by questions: Who will track progress toward forgiveness? Will years of payments still count? Is the paperwork safe, or will it be lost in the shuffle?
Until a clear transition plan is in place (something Trump’s remarks did not spell out), PSLF, IDR, and other forgiveness pathways are essentially in administrative purgatory. Borrowers would be wise to keep making qualifying payments if they can—the laws authorizing these programs still stand, and experts stress that forgiveness should eventually be granted. However, these programs’ timelines and smooth functioning are in doubt.
Department Of Education Fallout: Student Loan Servicing Issues And Increased Borrower Confusion
Communication breakdowns and servicer errors are other likely consequences of shutting down the Department of Education, and borrowers are already reporting heightened confusion. Federal loan servicers have contracts with the Education Department to handle customer service. Still, with their federal overseer in retreat, the usual guidance channels may evaporate. Borrowers fear a Wild West of misinformation. “I called my servicer and they literally told me, ‘We’re waiting on guidance from Washington,’” Ashley Morgan, a trial attorney in Austin, Texas, told me in an interview. “Nobody could answer my question about whether my automatic payment would be processed next month. It’s like no one knows who’s in charge.”
Morgan’s experience echoes across social media forums, with countless borrowers describing mixed messages and uncertainty. Some received emails saying to continue making payments as usual while also seeing news that the Education Department won’t be around to oversee those payments. This kind of whiplash messaging has left many borrowers feeling stranded and could be exacerbated with Trump’s executive order.
Experience shows that servicing disruptions hit borrowers hard. For example, in the fall of 2021, multiple major servicers (Navient, FedLoan, Granite State) exited the federal loan program, causing millions of accounts to be shuttled to new servicers. In those transitions, borrowers frequently encountered lost records, payment misapplications, or lapses in enrollment in programs like auto-debit and income-based plans. The Consumer Financial Protection Bureau reported a surge in borrower complaints during that period, and a Government Accountability Office review found that important information (like counts of qualifying PSLF payments) was sometimes transmitted incorrectly between servicers.
If those relatively routine transfers caused headaches, the fallout from the eventual wholesale Department of Education shutdown could be far worse. Borrowers may not even know whom to call for help. Do you contact your loan servicer as usual? A Treasury Department call center (if that agency takes over the program and has one set up)? A new hotline that hasn’t been advertised yet? The lack of clear answers will likely yield frustration and skyrocketing complaint volumes. With the Education Department on a path to being potentially dismantled, there’s a real risk that servicer performance will deteriorate even further without federal monitoring.
Service levels could also drop as uncertainty trickles down to front-line call center staff. If servicers aren’t sure whether they’ll be paid or their contracts will be honored in a few months, they may cut costs or put projects on hold.
Another potential issue could be miscommunication on borrower accounts – for instance, a borrower might submit proof of public service employment or an IDR application, and if Education Department staff who typically review those are not available, servicers might mistakenly put loans into temporary forbearance or mark accounts as past due. Errors like erroneous delinquency reports to credit bureaus or unexplained changes in monthly payment amounts could proliferate during the transition.
The Uncertain Road Ahead For Student Loan Borrowers
Trump’s executive order to ultimately shut down the Department of Education marks the beginning of an extraordinarily uncertain chapter for student loan borrowers. The directive is now on paper, but its implementation remains unsettled – effectively placing one of the government’s most extensive consumer finance programs in limbo. In the coming weeks and months, we will learn more about the short-term plan for student loans as well as the longer-term vision assuming the department is shut down.
Until then, borrowers must navigate a landscape clouded by unanswered questions. The key takeaway is that your federal student loans aren’t going away, but the infrastructure that manages those loans is changing rapidly. As a borrower, staying vigilant and proactive is crucial. Continue to fulfill your obligations and verify that those actions are properly recorded. Keep copies of everything, and don’t hesitate to escalate issues.
Over 40 million fellow borrowers are in the same boat, and consumer advocates, state officials, and legislators are watching these developments closely. There will likely be pressure on the administration to minimize harm and confusion from shutting down the Department of Education – but it may take time for solutions to materialize.
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