Millions of student-loan accounts are being transferred to the Treasury. There's a new push to slam the brakes.
The federal student-loan portfolio could soon be overseen by a new agency. Not so fast, Democratic lawmakers say.
On April 1, a group of five Democratic senators, including Sens. Elizabeth Warren and Bernie Sanders, asked the Treasury and Education Departments for more information on the planned transfer of student-loan borrowers’ accounts.
It comes on the heels of a March 19 announcement that the Department of Education would begin moving the $1.7 trillion federal student-loan portfolio to the Treasury Department. The transition is set to occur in phases, beginning with the transfer of 9 million defaulted student-loan borrowers’ accounts — nearly a quarter of the 40 million Americans with student debt.
The lawmakers wrote in their letter that the administration has yet to explain how the transfer will improve efficiency, and that there’s no evidence that Treasury is equipped to manage the portfolio. Managing borrowers’ accounts is a major administrative task, and the agency would be required to oversee proper communication with borrowers and facilitate a range of repayment plans. It’s unclear if the Treasury has those mechanisms in place.
The lawmakers called on the leaders of the Treasury and the Department of Education to rescind the partnership and provide further detail on the transfer, including a timeline for each phase, how the Treasury’s performance would be monitored, and how the agency would communicate with defaulted borrowers.
The transfer “threatens to trap student loan borrowers, students, and families in chaos and bureaucracy, all while American taxpayers are left to foot the bill for Treasury to administer programs that ED can and should administer itself,” the senators wrote.
Ellen Keast, the Education Department’s press secretary for higher education, told Business Insider that “now is the time for a hard reset in how the federal government provides and services student loans.”
“We are confident that our partnership with the Treasury, an experienced and proven fiduciary, will strengthen program administration and better serve American students, borrowers, and taxpayers,” Keast said.
The Treasury Department did not immediately respond to a request for comment from Business Insider. Treasury Sec. Scott Bessent said alongside the March announcement that his agency has “the unique experience, the operational capability, and the financial expertise to bring long overdue financial discipline to the program.”
The transfer is part of the Trump administration’s broader goal to dismantle the Department of Education. While the department said the Treasury would begin with defaulted accounts, the later phases would allow the agency to take over non-defaulted accounts to the extent permitted by law.
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