President Donald Trump has ordered the immediate transfer of federal student loan management from the Department of Education to the Small Business Administration (SBA), marking a significant shift in handling the country’s $1.777 trillion student loan portfolio.
“They are all set for it, they are waiting for it. It’ll be serviced much better than it has in the past,” Trump told reporters in the Oval Office on Friday.
The decision follows Trump’s executive order instructing Education Secretary Linda McMahon to take all necessary steps to dismantle the Department of Education, fulfilling a long-standing campaign promise. However, the White House has acknowledged that Congress must act to fully dissolve the agency. White House Press Secretary Karoline Leavitt clarified that while the department won’t be abolished entirely, it will be “much smaller than it is today.”
The order mandates that the department maintain the uninterrupted delivery of services, including Title I funding for high-poverty schools and Individuals with Disabilities Education Act funding. Meanwhile, Health and Human Services will take over nutrition and special education programs, though details remain unclear.
The Trump administration has already reduced the Education Department’s workforce from 4,133 to 2,183 employees. The Office for Civil Rights has also been significantly downsized, with seven regional offices closed.
Reaction and Concerns
The transition of student loans to the SBA raises additional concerns. Initially established in 1953 to manage small business and disaster recovery loans, the SBA was criticized for widespread fraud in its COVID-19 relief programs. The agency’s Inspector General estimated in 2023 that over $200 billion in potentially fraudulent loans were distributed, roughly 17% of total disbursements.
Additionally, the SBA has announced a 43% workforce reduction, eliminating about 2,700 positions from its nearly 6,500 employees. By comparison, the Education Department’s Federal Student Aid office previously employed about 1,500 workers to manage loan applications and inquiries.
However, colleges and universities are already reporting backlogs following layoffs in the department’s student aid office. Borrowers face uncertainty as the transition unfolds, with no clear timeline on how the SBA will take over loan servicing.
