The Trump administration is weighing a major restructuring of the federal student loan system that would move it out of the Department of Education and into agencies better equipped for large-scale financial operations.
According to One America News, officials initially examined transferring management of the program to the Small Business Administration (SBA) as part of President Donald Trumps broader effort to scale back the Education Departments footprint in Washington. The federal student loan portfolio, which now serves more than 40 million Americans, has long been housed in an agency better known for regulation and bureaucracy than for efficient lending, a mismatch conservatives have criticized for years.
Under the early proposal, the SBA an agency focused on lending, disaster assistance and counseling for entrepreneurs would assume responsibility for servicing, repayment plans and loan forgiveness. Trump has previously signaled his skepticism of the current arrangement, telling reporters in March at the White House, I dont think the Education [Department] should be handling the loans. Thats not their business.
He argued at the time that the SBA would be a more logical home for the program and noted that SBA Administrator Kelly Loeffler supported the concept. Officials have reportedly been reviewing how existing contracts with loan servicers might be unwound or reassigned if such a transfer were implemented, a complex process given the size and scope of the $1.6 trillion portfolio.
Some within the administration and policy community have raised doubts about the SBAs capacity to absorb such a massive new mission. SBA has a longstanding experience and relationship lending to small businesses, said Michael Negron, who worked on small business and student loans for the National Economic Council and as an adviser to SBA during former President Joe Bidens administration.
Anything where you venture outside of that, there are just more risks, not only to the federal government, but also to the borrower. In response to those concerns, the White House is now advancing a more ambitious modernization plan that would ultimately place operational control of the $1.7 trillion federal student loan portfolio with the Department of the Treasury.
By shifting management to Treasury, the administration aims to harness what officials describe as world-class financial infrastructure and operational expertise to protect taxpayers and reduce bureaucratic overlap. For conservatives who have long argued that the Education Department should focus on academics rather than acting as a massive bank, the move represents a decisive step toward limited government, fiscal responsibility and a more accountable, streamlined experience for American families.
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