Trump Shifts Defaulted Federal Student Loans From Education to Treasury in Major Step Toward Winding Down Department

The Trump administration has signed an interagency agreement moving operational responsibility for collecting on defaulted federal student loans from the Department of Education to the Treasury Department, a shift officials call the largest concrete step yet toward dismantling Education as a standalone cabinet agency. Undersecretary of Education Nicholas Kent told Fox News this is part of a multi‑phase plan and described the move as a 'proof of concept' to show Congress and families that federal grants and student loans can continue without a dedicated Education Department. Cato Institute analyst Andrew Gillen noted that student-loan operations are the department’s biggest staffing and budget component, so transferring them to Treasury would make it far more feasible to shut the agency down, a characterization Kent explicitly endorsed. Education Secretary Linda McMahon framed the broader effort as cutting Washington 'red tape' and shifting programs to other agencies, while the department argued Treasury’s role will help mitigate what it calls Biden-era mismanagement of the $1.7 trillion student-loan portfolio, where less than 40% of borrowers have repayment plans and about a quarter are in default. The deal signals a serious federal reorganization of higher-ed finance infrastructure and escalates a long-running conservative push to return more control over education policy to states and localities.