LDF Condemns the U.S. Department of Education’s Recent Action Transferring Student Loan Borrower Accounts to Treasury Department

Read a full PDF of our statement here.

On March 19th, the U.S. Department of Education announced it would begin transferring responsibility for managing federal student loan functions to the Treasury Department, starting with defaulted loans. The move is an escalation of the Trump Administration's plans to dismantle and weaken the Department of Education, and poses a dangerous risk to millions of borrowers, especially Black borrowers, other borrowers of color and low-income borrowers, who are disproportionately burdened by student loan debt. Almost 1 in 4 student loan borrowers are in default or serious delinquency; this number is expected to continue to grow due to the current affordability crisis, the elimination of the Saving on a Valuable Education (SAVE) plan, and the detrimental changes to the student loan system required by last year's One Big Beautiful Bill Act. The Department of Education claims that this change will promote efficiency, but it will only lead to more chaos, confusion, and instability for millions of Americans already struggling in student loan repayment.

Senior Policy Counsel Ashley Harrington at the Legal Defense Fund (LDF) issued the following statement:

"The Trump Administration's action to needlessly transfer responsibility for millions of defaulted student loan borrower accounts to the Treasury Department's stands as yet another egregious step in its unlawful attempt to dismantle the Department of Education. Rather than offering much-needed support for struggling borrowers, this shift risks pushing stability further out of reach for those who need it most. The consequences of defaulting on a federal student loan are devastating and any delays in a borrower's ability to get back on track can have long-term ramifications. Treasury staff are not experts on the complex federal student loan system and cannot ensure that borrowers are able to access all of the tools and programs they are entitled to under the Higher Education Act. This action will inflict real harm on borrowers and will disproportionately burden Black borrowers, borrowers of color, and low-income borrowers who continue to bear the heaviest weight of the student debt crisis.

"Rather than being laser-focused on dismantling an agency relied on by tens of millions of students, families and borrowers, we urge Secretary McMahon to put resources towards expanding educational opportunity for all. Congress created the Department of Education and the Office of Federal Student Aid, and it must require the Department of Education to carry out its statutorily required functions and prohibit taxpayer dollars from funding these unlawful and harmful actions."