How Student Loans Will Be Affected by Department of Education Closing Down
March 6, 2025
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President Donald Trump is soon expected to shut down the Department of Education (DoE), after the Federal News Network obtained a draft memo that contained the president’s plans to sign an order titled “Eliminating the Department of Education.”
Newsweek has contacted the Department of Education out of hours via email for comment.
Why It Matters
The potential dismantling of the DoE would not just be an administrative shift—it could have significant consequences for millions of borrowers and the broader education system.
The department currently oversees federal student loan programs, distributes financial aid and enforces policies meant to protect borrowers from predatory lending practices.
Eliminating the DoE could introduce uncertainty into loan servicing, possibly delaying repayments, altering forgiveness programs or making it harder for students to access federal aid.
Department of Education headquarters as seen in Washington, D.C., on February 14, 2025. Department of Education headquarters as seen in Washington, D.C., on February 14, 2025. Francis Chung/POLITICO via AP
What To Know
According to Federal News Network, the memo of the order read: “We are to identify which of the Department’s functions, programs, and offices are not mandated by statute, and eliminate them. 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.”
The Wall Street Journal has also reported that the signing of the order could come as soon as Thursday, according to sources familiar with the matter it did not name.
Once Trump’s order to eliminate the department is signed off, the Office of Federal Student Aid (FSA), which handles loan disbursement, servicing and borrower assistance, which the DoE currently runs, might need to be transferred elsewhere.
As the federal student loan system is a financial obligation between borrowers and the government, eliminating the DoE wouldn’t erase those obligations, as Forbes reported.
The most likely transfer would be to the Department of Treasury, as an expert previously told Newsweek.
Although, according to experts who previously spoke to Newsweek, previous attempts to have the Treasury Department directly manage student loans were “not as effective” as private contractors.
One thing that could be at risk by the seemingly imminent changes of the DoE would be student loan forgiveness programs.
Programs like Public Service Loan Forgiveness and Income-Driven Repayment could be eliminated, according to Forbes, and this could also have implications on applying for forgiveness in the future.
This could have huge repercussions on the millions of Americans with student loan debt, which is as many as one in four Americans under the age of 40, according to Pew Research Center.
What People Are Saying
Education Secretary Linda McMahon reportedly said in a speech to DoE employees on Monday, according to Federal News Network: “Removing red tape and bureaucratic barriers will empower parents to make the best educational choices for their children.”
“An effective transfer of educational oversight to the states will mean more autonomy for local communities. Teachers, too, will benefit from less micromanagement in the classroom—enabling them to get back to basics,” she added.
@krassenstein, an X user with more than 860,000 followers who runs the political commentary channel Krassen Cast with his brother, wrote in a post on X: “President Trump is reportedly set to sign an executive order this week to abolish the Department of Education.
“Dismantling public education is how they keep people uninformed, making them more susceptible to conspiracy theories and more likely to vote against their own interests.”
Oregon Congresswoman Maxine Dexter, wrote in a post on X: “If Trump gets his way and guts the U.S. Department of Education, 7.5 million students with disabilities will lose access to critical special education services funded by the federal government. The American people did not vote for reckless, chaotic attacks on our children and public schools—and I will fight to ensure every student gets the support they deserve.”
What Happens Next
How the student loan system will be managed going forward is currently uncertain, but one thing is black and white—the shutting down of the Department of Education would not cancel student loans and debt, as the federal government still own the loans and borrowers are still responsible for repaying them.
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