President Trump’s decision to shift student loans from the Department of Education to the Small Business Administration (SBA) is causing alarm among borrowers. Critics argue that it’s a clear sign that the White House has no real plan for its efforts to dismantle the Department of Education, leaving millions of borrowers uncertain about their future.
Last week, Trump signed an executive order to begin dismantling the Department of Education. In a follow-up move, he has announced that student loans would be transferred to the SBA, which had also recently revealed plans to cut 40% of its workforce.
Student loan advocates have been frustrated with the current system for years, but this move has raised even more concerns. Taking the nation’s largest federal program and putting it under the SBA, which is reducing its staff, could create more problems than it solves.
“Borrowers right now are already having to experience an unprecedented level of chaos and uncertainty,” said Aissa Canchola Bañez, policy director for the Student Borrower Protection Center.
She warned that transferring student loans to an agency with no experience in student lending and borrower protections under the Higher Education Act will only worsen the situation.
Trump’s plan also includes shifting programs for students with disabilities to the Health and Human Services Department, but so far, he has not provided specific details on how this will affect student loan borrowers. Both the Department of Education and the SBA have praised the move.
Meanwhile, an official confirmed the government would be cutting about 2,700 jobs from its nearly 6,500-person workforce.
“This just really underscores that there has been no planning. There is no plan, and that is the most scary, frankly, and dangerous thing about this,” said Jessica Thompson, senior vice president for the Institute for College Access & Success. “Because 44-plus million people owe money to the federal government from their student loans, and they are already in a state of confusion.”
Thompson stressed that moving the student loan program to another agency should involve careful planning and input from Congress.
The Education Department responded by saying, “No changes have been made yet, so there are no changes for student loan borrowers to navigate at this time.”
For now, experts are advising borrowers to reach out to their loan servicers and keep detailed records of their payments. They also pointed out that the Education Department has already cut about half of its workforce.
“I don’t know what element of federal government I want chaos to be in, but I think that one of the last places is going to be federal student aid, because that directly affects just millions and millions of people in a very real, like paying for college and managing their loans,” said James Murphy, director of career pathways and postsecondary policy at Education Reform Now.
Student loan borrowers are already facing challenges, especially after a court ruling last month blocked Biden’s student loan forgiveness plan, which had affected 8 million borrowers. The Trump administration also canceled access to income-driven repayment (IDR) plans, which was previously available under Biden’s policies. Though the Education Department promised to restore access soon, that has not happened yet.
As the situation remains uncertain, advocates say there is little advice they can offer borrowers.
“There’s no good advice, and any expert giving advice doesn’t know what he’s talking about. There’s no good advice to give. This is the Wild West,” said Alan Collinge, founder of Student Loan Justice. “Right now, borrowers have zero power, and we’re being pushed around on a chessboard like pawns. We have no power. We have no leverage.”
Collinge believes the Trump administration might be intentionally trying to “crash the federal student loan program” in order to devalue it and sell it off to a third party.
Canchola Bañez advised borrowers to take three key steps: download their payment history from the Federal Student Aid portal, keep screenshots of any forgiveness tracking information, and contact their members of Congress for help.
“Members of Congress have entire teams that are dedicated to accessing casework on behalf of constituents that are having challenges with the federal agency, and these loans are directly from the Department of Education, and so borrowers should reach out for help from the members of Congress, regardless of their party, and demand that their members start working on their behalf, especially if they’re not able to get answers from the department,” she said.
