Student loan borrowers may be experiencing whiplash this year, as the rules and guidelines for repayment have continued to see massive sweeping changes. If you’ve been following along with political news in recent months, you’re likely already aware of the fact that president Donald Trump has plans to dismantle – and perhaps entirely abolish, the Department of Education. This is a far cry from Joe Biden’s economic plans, which included wiping out millions in student loan debt over the course of his term, and setting the stage for additional loan forgiveness down the line. Whether you’re a borrower concerned about your financial future, or just a passive onlooker questioning the economic impact of Trump’s many executive orders, you may be interested in what happens to unpaid student loans when and if the Department of Education goes the way of the dodo bird.
Luckily we’ve got you covered, with a comprehensive look into the history of the Department of Education, what Trump is proposing at this time, and what we can expect to see of student loan regulations in the foreseeable future. The situation is quite complex, and there’s not much precedent for what Trump is proposing, so it’s worth speculating on how exactly all of this is going to impact you and your loved ones personally. With no further preamble, let’s dive right in and see what we can learn about the financial future of millions of Americans.
What Is The Department Of Education?
Though the concept of the Department of Education can be traced back to Andrew Johnson’s presidency in 1867, the actual cabinet wasn’t established until Congress greenlit its creation in 1979. Since then, the DOE has been an integral element of daily life for American citizens, with a dedicated focus on monitoring nationwide curriculum standards, assisting disabled people with schooling and additional resources and providing grants, scholarships and loans to students seeking a higher education. The department’s formation was seen as a major win for the progressive Democrats of the Carter era, though calls to abolish the public office came almost immediately. Hard-right conservatives, including those working for the Reagan administration, sought to dismantle the department in its infancy, but these calls to action were largely squashed by congress, and lacked voter support.
Today, the Department of Education oversees more than $1.6 trillion in student loan debt, and employs thousands of Americans all over the country. The department also hands out roughly $30 billion annually in Pell Grants, offering low-income students a chance to pursue a college education. Annual spending on discretionary programs and other DOE responsibilities cost taxpayers about $79 billion in 2024, though these programs are invaluable to millions of citizens who rely on basic aid to complete their schooling. As one representative from the NAACP explained in a statement to Reuters, the DOE “plays a crucial role in ensuring equal access to quality education, protecting students’ rights, and holding schools accountable.”
Can Trump Unilaterally End The Department Of Education?
Sitting president and 34-time convicted felon Donald Trump is seeking to wipe out the Department of Education, largely due to its focus on upholding diversity, equity and inclusion within classrooms across America. Many legal scholars have pointed out that Trump cannot legally dismantle the department with an executive order alone, but rules and regulations have never been much of a deterrent to the twice-impeached commander-in-chief, so it’s entirely possible that Trump leaps past the guardrails without any real pushback from his peers. Closing the DOE would also be a deeply unpopular move amongst the general public, and technically requires an act of Congress to complete. Despite these regulations, droves of staffers at the Department of Education have already been purged from their offices, signaling a rapid and systemic shutdown.
Columbia University professor Jonathan E. Collins is one of many educators to weigh in on Trump’s ongoing war against the DOE. While speaking with Time, Collins stated, “You can’t just drop a bomb on the Department of Education and turn it into rubble. Legally, it has to start with Congress, not the president.” Even if Trump does garner the support from Congress, the process of closing down the department would be long and laborious. This would mean finding new departments and chairs to oversee the massive responsibilities of the DOE, many of which would likely land in the hands of private for-profit contractors. Certain educators and legal scholars have even theorized that unelected bureaucrats close to the Trump administration, such as Elon Musk, may stand to benefit from the dissolution of the department, and that the entire scheme is a ploy to put billions back into the hands of private far-right investors.
Will Student Loans Be Cancelled If The DOE Shuts Down?
Unfortunately, student loan records won’t just dry up and disappear if the DOE turns DOA. There’s not much precedent for this sort of thing, but it seems significantly more likely that the loans would be shifted to another government owned agency, such as the Treasury Department. For some borrowers, this would mean that their payment schedules will continue nearly uninterrupted, as the treasury absorbs the debt and continues to collect. For others, this could mean a hit on their taxes, as the IRS could consider student loan repayment during your annual filing. Those who have loans through private entities such as banks and credit unions will be completely unaffected, as these entities will continue to collect as usual.
The largest issue plaguing the possible dissolution of the Department of Education lies not with post-graduate borrowers, but with young students seeking to take out loans in the future. Student loan forgiveness programs are expected to be first on the chopping block, while federal subsidies such as the Pell Grant could disappear entirely. This means that lower income students could be locked out of the pursuit of a higher education entirely, further widening the already stark wage gap within the United States. For now, there’s really no way to predict how this entire saga will play out, though anyone hoping that the Trump administration will somehow eliminate student loans can likely put this ambition to rest. If you’re currently repaying your loans, or deferring them, be sure to keep an eye on your existing policy, as it’s likely to undergo some major changes in the coming months.
