What Happens to Student Loans If The Department of Education is Abolished?

• You won’t see any changes overnight if Congress abolishes the Department of Education. It takes a full act of Congress to eliminate a federal agency—which can drag on for years. But eventually, your repayment options could change if the Treasury takes over or if private lenders buy your loans.

• Keep track of every policy update, download your payment records, and watch for new emails from your servicer. These steps protect your repayment progress and shield you from scams if things change.

• You could lose or see changes to forgiveness programs if a new agency—or private lenders—rewrite the rules. Stay alert, confirm you still qualify, and be ready to switch your repayment plan if Congress rewrites borrower protections.

President Donald Trump has shared that he wants to eliminate the U.S. Department of Education. This isn’t a new goal for Republicans. And it’s not a surprise from Trump. After all, he promised to do so on his campaign, and he repeated it in a statement about his nomination of Linda McMahon for education secretary, saying, “We will send Education BACK TO THE STATES, and Linda will spearhead that effort.”

But what does eliminating the Education Department mean for the 42 million Americans with federal student loan debt?

No, President Trump, or any president for that matter, can’t unilaterally abolish or dismantle the Department of Education. Under the U.S. Constitution, only Congress can pass legislation to eliminate a federal agency it created.

Why This Matters:

• Checks and Balances: Think of it like needing two keys for a secure vault—both the House and Senate must sign off to kill the ED.

• Legal Hurdles: Even if the president tries an executive order, lawmakers and courts can block or undo it.

• Congress Controls the Budget: A president can propose deep cuts or move some ED responsibilities elsewhere, but only Congress can officially shut down the agency.

The Education Department was created in 1979 by the Department of Education Organization Act, signed by President Jimmy Carter. Because Congress established this agency, only Congress can dismantle it. The president can lobby to shut it down, but there’s no way around Congress under the separation of powers.

Even if a president tries to dissolve or defund the department, your student loans won’t change overnight without Congress on board.

But over time, budget cuts or orders from the White House could chip away at the ED’s role—changing how loans are serviced or forgiven. A full-scale shutdown of the department would still need Congress, which makes it a long, complicated process.

It’s harder to shut down the Department of Education than to get rid of the U.S. Agency for International Development (USAID).

Why?

As we said above, the Education Department was born from an act of Congress, so only Congress can repeal it. USAID, meanwhile, came from an executive order signed by President John F. Kennedy in 1961. This gives the executive executive branch greater freedom to reorganize or wind it down without heavy congressional involvement.

Political and Legal Complexities

• Congressional Hurdles: Abolishing the department requires majority votes in both the House and Senate—a major climb given how politically charged education policy is.

• Court Challenges: If the president tries to weaken the department with executive actions or budget cuts, states and advocacy groups can sue to protect federal education programs.

• Student Loan Oversight: The Education Department handles federal loans in tandem with other agencies, so moving this responsibility (e.g., to the Treasury) would be complicated and face intense public scrutiny. USAID, with a narrower mission, is easier for the president to adjust through executive powers.

If the Education Department is abolished, someone else will have to manage your federal student loans. Most likely, that means the U.S. Treasury Department, private lenders, or state-based programs stepping in—with real consequences for how you repay, qualify for loan forgiveness, and get help.

1. The U.S. Treasury Department

Many experts view Treasury as the logical successor because it already oversees government debts.

• Think of it like going from a specialized hospital (the Education Department) to a general clinic (Treasury). They can still treat you, but it’s not their main focus.

• Upsides: Your loans stay government-held. Income-driven repayment might continue in some form.

• Downsides: Treasury’s job is to collect money, not to run borrower-friendly programs. Customer service and oversight could suffer.

2. Private Lenders or Servicers

Handing federal loans to private companies is similar to the old Federal Family Education Loan (FFEL) Program, where banks issued government-backed loans.

• Major Risks: You’d likely lose flexible repayment plans, Public Service Loan Forgiveness, and other federal benefits. Private lenders also tend to have tougher collection tactics and might charge higher interest rates.

• Possible Upside: If multiple lenders compete, some borrowers might snag lower interest rates—but that’s not a sure thing.

3. State-Based Loan Programs

Some lawmakers suggest giving each state the power to manage its own student loans.

• Fragmented Approach: Different states could offer different repayment rules. If you move or work across state lines, it could get messy.

• Local Control: States might craft unique programs, but you could lose consistency and simplicity.

No matter who takes over—Treasury, private lenders, or the states—your student debt won’t vanish.

Abolishing the Education Department simply shifts control, which can profoundly change the repayment plans, protections, and forgiveness programs you rely on.

If the Education Department goes away, popular forgiveness programs—Public Service Loan Forgiveness (PSLF), income-driven repayment (IDR) forgiveness, and Borrower Defense—could vanish or change dramatically. It all depends on who takes over student loans and what Congress decides to do with the existing laws.

The Future of PSLF

PSLF forgives the balance on Direct Loans after 120 qualifying payments for people working in government or nonprofit jobs. If the Education Department is abolished:

• Treasury Takeover: PSLF might survive under Treasury, but it could come with stricter rules or tougher eligibility since Treasury prioritizes collecting debt.

• Privatization: If private lenders take over, PSLF would almost certainly end because private companies rarely offer forgiveness.

• State-Based Programs: Some states may create small-scale public service incentives, but they won’t match the broad federal PSLF benefits.

Related: Can PSLF Be Reversed?

IDR Forgiveness Under a New Agency

Plans like SAVE, PAYE, and IBR cap your monthly payments based on your income and forgive whatever’s left after 20 or 25 years. Without the Education Department:

• Under Treasury: You might still get IDR forgiveness, but expect more hoops to jump through or longer payoff timelines.

• Private Lenders: IDR typically won’t exist in a private system, so you’d likely lose income-based repayment options.

Borrower Defense and Closed School Discharges

Borrower Defense helps if your school lied to you, and Closed School Discharges apply if your college shuts down unexpectedly. Once the Education Department is gone:

• Weakened Protections: Borrower Defense claims could stall or disappear under Treasury or private lenders.

• Fewer Automatic Discharges: Closed School Discharges might not be automatic anymore. You could be left with loans for a school that no longer exists.

Will Forgiveness Disappear Entirely?

It’s possible—especially if your loans land with private lenders—but Congress must approve any sweeping changes to federal forgiveness laws. A Treasury-led system might keep some form of forgiveness, but a purely private model would probably phase it out.

Ultimately, whether these programs survive depends on future legislation and the priorities of whatever agency (or organization) steps in.

If the Education Department is abolished, you’ll still make payments to servicers like Nelnet, MOHELA, and Aidvantage—but under new contracts and oversight.

Who takes over (Treasury, private companies, or state agencies) will shape how well servicers are funded, monitored, and required to help you with repayment issues.

Servicer Contracts in Flux

• Treasury Takeover: The Treasury Department might extend or renegotiate current servicer deals, but its main goal is collecting money, not helping borrowers. Expect fewer resources for customer service, handling disputes, or updating repayment plans.

• Privatization: If federal loans go to private entities, new servicers could replace the ones you know. That often means losing federal benefits like income-driven repayment and forbearance, and facing stricter rules instead.

Potential Disruptions for Borrowers

• Loan Transfers: Large-scale restructuring could send your loans to a different company—similar to past shifts from Navient to Aidvantage. That can trigger billing errors or confusion if not managed carefully.

• Reduced Oversight: With the Education Department gone, servicers could face less federal scrutiny. It might be tougher to correct errors or appeal decisions.

• Beware of Scams: Big changes often bring shady “debt relief” offers. Keep detailed payment records, confirm emails through official channels, and stay informed about new policies to protect yourself.

Yes. The government can sell its student loan portfolio to private lenders, but it would need Congress to sign off. That’s a heavy political lift, and if it did happen, you’d likely lose many of the federal protections you rely on now.

How Privatization Might Work

• Portfolio Sale: Similar to the old FFEL Program, the government could auction or transfer your loans to banks and other financial institutions.

• New Loan Terms: Current servicers might compete with new players, leading to more restrictive repayment rules or higher interest rates.

What Borrowers Could Lose

• Income-Driven Repayment: Private lenders rarely base payments on your income. Your monthly bills could jump, especially if you rely on IDR.

• Public Service Loan Forgiveness: Without the Education Department to oversee PSLF, it would probably end or shrink significantly.

• Forbearance and Deferment: Private lenders don’t have to follow federal guidelines, so you could lose straightforward ways to pause payments.

Potential Upsides—and Caveats

• Refinancing Opportunities: Competing private lenders might offer lower rates for some borrowers, but people with less stable finances may see tougher terms.

• State Programs: Some states might step in with their own loan assistance, but these wouldn’t match the existing federal protections.

It won’t happen overnight. Because Congress created the Education Department by law, shutting it down means passing a new bill through both the House and Senate—a process that can take months or even years. And that’s just the start.

Legislative and Legal Hurdles

• Passing a New Law: Getting even a simple majority is far from guaranteed. Efforts to kill the department often stall in committee or lack the broad support needed to pass.

• Transition Logistics: Once a bill is signed, federal agencies need time to transfer data, staff, and contracts. A special task force would manage these details, causing more delays.

• Court Battles: States, advocacy groups, and possibly federal employees could file lawsuits to keep current education programs, which would drag out the timeline even further.

Effect on Borrowers During the Transition

You’d likely keep making payments to the same servicers under existing contracts while the legal and political fights play out. But if the department’s budget is slashed or oversight moves to another agency—like the Treasury—you might see changes to repayment plans, forgiveness options, or how quickly servicers handle disputes.

Even though some leaders talk about shutting down the Education Department, polls show most Americans—and even many Republicans—oppose the idea. One survey found that 61% of Americans want to keep the department, and Republican voters oppose killing it by a two-to-one margin.

That’s because federal education spending covers more than just bureaucracy. Title I grants fund classrooms in underserved areas, and special-education programs protect students with disabilities nationwide.

Slashing or shifting these funds could rile parents, teachers, and advocacy groups who rely on federal mandates to support vulnerable learners.

Abolishing the department also requires Congress to repeal the laws that created it. Even if a budget-cutting administration tries to sideline federal oversight, completely removing the agency would spark lawsuits and political fights.

Lawmakers in swing districts—and governors who rely on federal funds—could push back against any attempt to yank away popular education subsidies. In short, dismantling the Education Department isn’t just about passing one bill—it’s a charged move that would shake up special-education funding, Title I, and other key programs.

For these reasons, any push to eliminate the department would likely be slow, tangled in litigation, and perhaps more politically risky than its supporters anticipate.