The US Department of Education has transferred responsibility for collecting defaulted student loans to the Treasury Department, starting with a phase that affects nearly 6 million borrowers who owe more than $120 billion. The move is part of a three-phase plan to offload key functions from the office of Federal Student Aid.
The Trump administration argues that Treasury, which already handles disbursements and tax refunds for federal student loans, has the expertise to manage collections. However, critics claim this will create confusion for borrowers and may not be suitable for the complex financial aid programs.
Some lawmakers welcome the change, saying it will simplify the system and reduce delays, while others worry about the impact on students who need support and the potential for red tape. Student advocates express concerns that Treasury may not have the necessary experience to handle the servicing of loans and administration of financial aid programs.
The Education Department is maintaining a role in the arrangement but sidestepping federal law requiring many student aid programs to be housed at the agency. The move is seen as another step by the Trump administration to outsource functions, with some experts questioning its effectiveness.
Source: https://www.washingtonpost.com/education/2026/03/19/federal-student-aid-transfer-treasury-department