Concerns Rise as Education Department Transfers Programs Amid Student Loan Crisis

Washington, D.C. — U.S. Secretary of Education Linda McMahon attended the International Women of Courage Awards Ceremony at the State Department on April 1, 2025, amid a significant shift in the Department of Education’s structure. This week, the department announced it would transfer many of its programs to other federal agencies, raising concerns for the 40 million Americans holding student loans.

Financial aid experts and consumer advocates worry that this move could destabilize oversight at a crucial time when more than 5 million borrowers are already in default, and student loan debt exceeds $1.6 trillion. Carolina Rodriguez, director of the Education Debt Consumer Assistance Program in New York, expressed that the timing of this change is alarming. “What is concerning is the destabilization of the Department of Education and Federal Student Aid at the very moment when consistent, technically skilled oversight is most needed,” she said.

The restructuring is part of a directive from the Trump administration to dismantle the Education Department. Officials have signed agreements with four federal agencies, including the departments of Labor and Health and Human Services, to manage programs currently under the Education Department. This action raises questions about the stability of student loan eligibility and repayment processes that rely on precise coordination.

Melanie Storey, president and CEO of the National Association of Student Financial Aid Administrators, remarked, “Student loan eligibility and repayment involve multiple systems working together, and institutions need that process to be seamless, current, and accurate.” She highlighted that as these programs transition, careful consideration of dependencies is vital.

Mark Kantrowitz, a higher education expert, warned that the Trump administration’s goal to weaken the Education Department could leave a hollow organization. He conveyed that while the department oversees a massive federal student loan portfolio, efforts to reduce its size might struggle as the structure is critical in ensuring loan processing and borrower support.

Consumer advocates cautioned that students have faced significant challenges under previous privatized lending systems. Rodriguez noted that during earlier privatization under the Federal Family Education Loan program, many borrowers experienced mismanagement, leading their debt to balloon without resolution. Aissa Canchola Banez, policy director at Protect Borrowers, echoed these concerns, stating any major loan transfer could increase errors that might harm borrowers further.

Currently, while private lenders account for only 8% of student loans, they represent more than 40% of debt complaints reported to the Consumer Financial Protection Bureau, indicating a growing issue that lawmakers are increasingly recognizing.