Trump is set to dismantle the Department of Education, which manages a $1.7 trillion loan portfolio
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President Donald Trump is reportedly set to sign an executive order that could kickstart the process of dismantling the Department of Education as soon as Thursday.
While only Congress — not the president — has the power to shutter the department, Trump’s executive order could set the process in motion.
A draft executive order reviewed by CNN instructs Education Secretary Linda McMahon to “take all necessary steps to facilitate the closure of the Education Department” while adhering to “the maximum extent appropriate and permitted by law.” Trump will likely push Congress to pass the necessary legislation later on.
The Education Department has a variety of responsibilities, including enforcing federal educational laws and conducting education research. But one of its main functions is distributing and regulating federal student financial aid, including federal student loans.
With a shutdown of the department potentially imminent, here’s what we know about how your student loans could be impacted:
President Donald Trump could sign an order to kickstart the Department of Education’s closure as soon as Thursdayopen image in gallery
President Donald Trump could sign an order to kickstart the Department of Education’s closure as soon as Thursday (Getty Images)
What happens to my student loans if the Department of Education closes?
Chances are, you will still need to pay back your student loan if the agency closes its doors.
That’s because the federal student loan system, while managed by the Education Department, is still an agreement between borrowers and the federal government. The law also mandates the federal government carry out student loan programs, according to Jon Fansmith, senior vice president at the American Council on Education.
“The law requires you to run financial aid programs. The law requires you to collect student loans. The law requires you to enforce civil rights at schools and campuses,” Fansmith told the National Association of Student Financial Aid Administrators.
“Simply getting rid of the organizing entity doesn't actually change the hundreds, possibly thousands of responsibilities the Department of Education has across a myriad number of laws,” Fansmith continued.
Instead, another agency — such as the Treasury Department — could absorb the department’s $1.7 trillion loan portfolio.
The Education Department is preparing to send a memo to employees explaining Trump’s executive order is imminent, the Federal News Network reports. The memo adds that officials are identifying the functions “that would be more effectively managed by other agencies.”
“We are to identify which of the Department’s functions, programs, and offices are not mandated by statute, and eliminate them,” the draft memo states, according to the Federal News Network. “This reorganization will impact staff, budgets, reporting, and more — and in coming months, we will determine how it can be accomplished with minimal delay and disruption.”
It isn’t guaranteed Congress will move to close the agency, either. Trump isn’t the first to call for the department to close or merge with another agency, and Congress has historically rejected these bids, CNN reports.
Trump could direct Education Secretary Linda McMahon to kickstart the department’s closure as soon as Thursdayopen image in gallery
Trump could direct Education Secretary Linda McMahon to kickstart the department’s closure as soon as Thursday (Getty Images)
Student loan programs are already facing disruptions
Student loan payment programs are already seeing disruptions as the department’s future is uncertain.
Last week, the department closed applications for income-driven repayment plans — which allow borrowers to craft affordable repayment schedules and identify paths to loan forgiveness — following a court order. This move could drive millions of borrowers into forbearance or unaffordable plans, Forbes reports.
The department has also faced severe cuts to staffing and funding, impacting other initiatives including the Total and Permanent Disability Discharge program, which provides loan forgiveness for people with permanent disabilities.
The program has been on pause for months due to a servicing platform transition — and while it’s expected to reopen this spring, ongoing cuts could slow it down, according to Forbes.
The Independent has contacted the Education Department for comment.