Treasury Department Takes Over Some Student Loans as Education Department Dismantled

The move is part of the Trump administration's effort to break up the federal education bureaucracy.

Mar. 20, 2026 at 12:03am

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The U.S. Education Department is handing off a portion of its $1.7 trillion student loan portfolio, about $180 billion in defaulted loans, to the Treasury Department. This is the first step toward the Treasury Department eventually taking responsibility for all federal student loans as the Trump administration works to dismantle the Education Department.

Why it matters

This realignment of federal student loan programs, which have been overseen by the Education Department for over 40 years, is part of the Trump administration's broader campaign to shutter the Education Department, which it sees as being overrun by liberal thinking. The move raises questions about the Treasury Department's ability to effectively manage such a complex loan portfolio.

The details

Under the agreement, the Treasury Department will take over management of student loans whose borrowers are in default, meaning they are months behind on payments. Eventually, the Treasury Department is to take responsibility for all student loans. Borrowers will continue to work with the same loan servicers and repay their loans the same way. The agreement is likely to face legal challenges, as federal law requires student loans to be overseen by the Education Department.

  • The agreement was announced on March 20, 2026.

The players

U.S. Education Department

The federal agency that has overseen student loan programs for over 40 years.

U.S. Treasury Department

The federal agency that will take over management of defaulted student loans and eventually all federal student loans.

Linda McMahon

The Education Secretary who said the agreement 'marks an intentional and historic step toward breaking up the Federal education bureaucracy and dramatically improving the administration of Federal student aid programs.'

Donald Trump

The former president who campaigned on shuttering the Education Department, which he sees as being overrun by liberal thinking.

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What they’re saying

“The agreement 'marks an intentional and historic step toward breaking up the Federal education bureaucracy and dramatically improving the administration of Federal student aid programs.'”

— Linda McMahon, Education Secretary

What’s next

The agreement is likely to face legal challenges, as federal law requires student loans to be overseen by the Education Department. The Treasury Department will eventually take responsibility for all federal student loans, though a timeline for the full transition has not been provided.

The takeaway

This move is part of the Trump administration's broader effort to dismantle the Education Department, which it sees as being overrun by liberal thinking. The transfer of student loan management to the Treasury Department raises questions about the agency's ability to effectively handle such a complex portfolio and the legality of the arrangement.