Last week, Trump announced that the United States’ $1.6 trillion student loan portfolio would be transferred from the Department of Education to the Small Business Administration (SBA). He claimed that this department would handle it much more effectively, though consumer advocates have voiced concerns.
Errors and Compromised Privacy
Some of the most notable issues raised have surrounded the potential for errors and compromised privacy for borrowers. Exactly how and why the SBA was chosen remains unclear, and whether all of the protections associated with the Department of Education’s former duties will remain in place is similarly vague.
Can Trump Move Student Loans to the SBA?
Aside from advocates raising concerns about the transfer of student loan debt, experts have questioned whether Trump has the authority to move these loans at all. While he claimed that the SBA was “all set” to manage the portfolio on Friday of last week, which includes the debt of more than 40 million Americans, the legality of the decision is evidently not on his side.
CNBC detailed the opinion of financial aid expert Mark Kantrowitz for context on the issue: “[He] pointed out that The Higher Education Act of 1965 is ‘very clear’ that the Education Department’s Federal Student Aid office is ‘responsible for student loans’ … ‘It will require an act of Congress,’ Kantrowitz said, to move the loans to the SBA.”
An Ongoing Effort to Dismantle the Department of Education
The move to transfer the United States’ student loan portfolio to the SBA comes as a part of Trump’s push to dismantle the Department of Education—a similar act of unfounded legality. The dismantling of a federal agency requires an act of Congress, though Trump was careful in his executive order to stop just short of a complete dismantling.
As the order stated, “The Secretary of Education shall, to the maximum extent appropriate and permitted by law, take all necessary steps to facilitate the closure of the Department of Education and return authority over education to the States and local communities while ensuring the effective and uninterrupted delivery of services, programs, and benefits on which Americans rely.”
Trump’s order is already facing legal challenges, and it is likely that this student loan plan will have a similar result.
A History of Poorly-Handled Transitions
It should be noted that according to deputy executive director and managing counsel at the Student Borrower Protection Center Persis Yu, previous transitions have gone poorly—but this move would be on an entirely different scale. SBA staff have no prior experience with handling federal student loans, and Trump already has plans to reduce the department’s workforce by 43%.
“Every transition has gone very poorly for borrowers,” Yu said. “These are very sensitive records and many of these loans go back decades.”
What Can Borrowers Do?
Fortunately for borrowers, experts are clear that the terms and conditions of a federal student loan cannot change, even if the agency changes. Regardless, any borrower should take the necessary steps to gather all information on their balance and keep an updated record. If any data is lost in the transfer—and there is precedent—this information will be essential.
Studentaid.gov provides access to a borrower’s student loan balance and payment progress, and information on the company servicing that debt is also available.
