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On March 19, 2026, the Department of Education announced it would transfer its entire $1.6 trillion student loan portfolio to the Treasury Department — the largest single step yet in the Trump administration's campaign to dismantle the Education Department. Education Secretary Linda McMahon declared the move part of a plan to "break up the federal education bureaucracy," framing the transfer as an efficiency measure that would consolidate financial management under Treasury Secretary Scott Bessent.
The transfer would proceed in phases. Treasury would first assume responsibility for the 9.2 million borrowers currently in default, then take over servicing for the much larger population of non-defaulted borrowers, and finally absorb administration of the Free Application for Federal Student Aid (FAFSA). The student loan transfer was one component of 10 interagency agreements that would redistribute more than 100 grant programs currently housed in the Education Department to other federal agencies.
Critics warned that the transfer would cause massive disruption for tens of millions of borrowers and that Treasury lacked the institutional expertise to manage a consumer lending portfolio of this scale and complexity. Student loan servicing required specialized knowledge of income-driven repayment plans, disability discharge processes, public service loan forgiveness, and dozens of other programs — none of which fell within Treasury's traditional competencies. Legal experts questioned whether the transfer could be accomplished without congressional authorization, as the department's loan servicing authority was established by statute.
The announcement marked a watershed in the administration's approach to federal restructuring. Rather than seeking congressional approval to close the Education Department — a goal Republican presidents had articulated since the Reagan era but never achieved through legislation — the Trump administration was effectively dismantling it through executive action, parceling out its functions to agencies across the government. Democrats and education advocates described the move as the most consequential unilateral restructuring of a Cabinet department in modern American history.