Trump Administration Moves Closer to Shutting Down Department of Education with Major Loan Shift

In what officials are calling the largest step yet toward dismantling federal education oversight, the administration of Donald Trump has initiated a major restructuring move involving the United States Department of Education.

The department announced a new interagency agreement with the United States Department of the Treasury, transferring key responsibilities related to federal student loan management. Under this plan, the Treasury will take over operations for collecting defaulted student debt and assist in returning borrowers to repayment.

A “Proof of Concept” for Closure

According to Undersecretary Nicholas Kent, the shift is part of a multi-phase strategy aimed at demonstrating that core education functions—such as student aid and loan servicing—can operate without a centralized federal department.

“This is the next and largest step toward winding down the Department of Education,” Kent stated, reinforcing earlier campaign promises by Trump to eliminate the agency entirely.

Why This Move Matters

Policy experts say this is not just symbolic. Andrew Gillen of the Cato Institute described the transfer as significant because student lending represents the largest budgetary and staffing component of the Education Department.

With nearly $1.7 trillion in outstanding student loan debt, the stakes are high. Currently, less than 40% of borrowers are on repayment plans, while about 25% remain in default—figures the administration argues justify restructuring.

Political and Policy Implications

The move follows a broader effort to decentralize federal education functions, shifting responsibilities to other agencies and state-level systems. Education Secretary Linda McMahon said the transition aims to cut bureaucratic inefficiencies while improving service delivery.

Officials also framed the decision as a response to what they described as mismanagement of the student loan portfolio under the previous Joe Biden administration.

The department has already reduced its workforce by over 40% and entered into multiple interagency agreements. If the Treasury transition proves successful, it could pave the way for legislative action to formally dissolve the department.

While supporters argue the shift will streamline processes and reduce taxpayer burden, critics warn it could lead to fragmentation in education policy and oversight.