What Happens to Student Loans Without the Department of Education?

Student Loans Department of Education: If the Department of Education were eliminated under a Donald Trump administration, it could cause big problems for federal student loans. The department currently manages about $1.5 trillion in student loan debt for over 40 million borrowers.

Without it, loan management and forgiveness programs might change or even end, leaving borrowers unsure about how to repay their loans.

Project 2025, a conservative plan backed by Trump supporters, suggests that the Treasury Department would take over student loan management. A board appointed by the president would oversee student aid, while the Treasury would handle payments, defaults, and borrower interactions, similar to how the IRS handles taxes. This could mean stricter repayment rules and fewer protections for borrowers.

A major concern with Project 2025 is the plan to change income-driven repayment (IDR) options, which let borrowers pay based on their income. The plan says current IDR options are too complicated and suggests one simple plan, where borrowers pay 10% of their income above the poverty line. This could lead to higher monthly payments for many borrowers.

Will it become more difficult to repay student loans?

The plan also calls for the termination of Graduate PLUS loans and Parent PLUS loans, which assist families in covering the cost of undergraduate education. For low-income families who would depend on these federal loans to pay for the growing expenses of college, the loss of these programs could further restrict access to higher education.

Programs for loan forgiveness, such as Biden’s SAVE proposal and Public Service Loan Forgiveness (PSLF), are also likely to be targeted for reduction.

In the past, Trump has opposed student loan forgiveness, and under Project 2025, these initiatives may be “death by neglect.” Education policy consultant Michael Itzkowitz cautioned that a Trump administration may covertly cut off funding for these forgiveness programs without direct congressional action, thereby terminating them permanently

These prospective adjustments portend a future in which student debt management will be more difficult, repayment schedules will be less accommodating, and forgiveness is unlikely. These radical changes would cause “chaos” that would disproportionately hurt working-class families, as education policy scholar Kelly Rosinger warned. Therefore, millions would have to deal with a considerably harsher and less encouraging lending regime if the Department of Education were to be dissolved.