Incoming-President Donald Trump’s second term is expected to have its share of shake-ups. Trump has promised to shut down several government agencies in an effort to reduce wasteful spending, which could have dramatic effects on the way government works. One of the agencies at risk is the United States Department of Education, which oversees and manages federal student loans and various programs that administer them. If the Education Department does go away, federal student loans will likely fall under the purview of a different government agency.
Key Takeaways
- President Trump has said he will abolish the U.S. Department of Education on more than one occasion, although actually doing so would require approval from Congress.
- If the Department of Education does cease to exist, management of existing and future federal student loans would likely be transferred to another government agency.
- The future of student loans in Trump’s second term is also uncertain in other ways, although a look at current GOP ideas in the Affordable Loans for Students Act and the College Cost Reduction Act can give us an idea of what to expect.
Can Trump Actually Close the Department of Education?
While it’s possible President-elect Trump could dismantle the Department of Education, doing so would necessitate a great deal of effort. Abolishing a government department requires an act of Congress, which means it would likely need bipartisan support.
This also isn’t the first time someone has attempted to put an end to the Department of Education. One of the most recent examples is H.R.899, To terminate the Department of Education, a bill introduced in February 2023 by Representative Thomas Massie (R-KY). Although the U.S. House of Representatives considered the bill, it hasn’t made any progress.
Closing the Department of Education would leave a variety of government programs and administrative duties up in the air. This includes the collection of federal student loan payments and full oversight of various repayment plans.
Education Under the Trump Administration
Without a government agency that focuses exclusively on education, what would happen to existing student loans? Unfortunately for borrowers, it’s highly unlikely that the Trump administration would forget (or forgive) these debts altogether. If the Department of Education was dismantled, it’s much more likely that an agency like the Department of Justice, Department of Labor, or Treasury Department could be put in charge of student loans. Of course, these agencies would likely need additional staff and support in order to take on the new workload.
Borrowers repaying their student loans on income-driven repayment (IDR) plans are also right to worry about the future. The Saving on a Valuable Education (SAVE) plan is currently paused as we await a decision on its legality from the courts, but there’s a good chance it will be struck down in the coming months. This would leave borrowers choosing from the IDR plans that are left, which may be overhauled or eliminated entirely after Trump takes office.
However, a couple solutions for easing the burden of our student debt crisis have been floated by GOP leaders. For example, Representative Mike Lawler (R-NY) introduced the Affordable Loans for Students Act, which would cut interest rates for most federal student loans to 1%.
Another bill, called the College Cost Reduction Act and introduced by Representative Virginia Foxx (R-NC), would double the maximum Pell Grant award and prevent interest from capitalizing on student loans. It would also replace all repayment plans with two options—a standard, 10-year repayment plan and a “repayment assistance plan.”
Under the new repayment assistance plan, borrowers only qualify for forgiveness after paying an amount of principal and interest equal to what would be owed under the standard 10-year plan.
The Bottom Line
Incoming-President Trump has promised to end the Department of Education, but no one’s certain whether he’ll be able to pull it off. All that borrowers with federal student loans can do right now is wait to see how the situation will play out and which repayment plans will still be available in 2025 and beyond.
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