U.S. Department of the Treasury and U.S. Department of Education Announce Historic Federal Student Assistance Partnership

Marks major step to return education to the States and break up the Federal education bureaucracy

The U.S. Department of the Treasury (Treasury) and the U.S. Department of Education (ED) today announced the Federal Student Assistance Partnership to enhance the administration of Federal student aid programs, mitigate the continuing fallout and cost to taxpayers from the Biden Administration's mismanagement of the Federal student loan portfolio, and facilitate the return of defaulted borrowers to repayment.

Currently, ED's student loan portfolio stands at nearly $1.7 trillion with fewer than 40 percent of borrowers in repayment and almost 25 percent of borrowers in default. Student loan debt is roughly twice the size of all American university endowments combined and is larger than either our nation's cumulative credit card debt or cumulative auto debt. ED was never intended to operate what would be the fifth-largest commercial bank in the United States, distributing over $100 billion each year in Federal student loans and grants.

"The Federal Student Assistance Partnership marks an intentional and historic step toward breaking up the Federal education bureaucracy and dramatically improving the administration of Federal student aid programs that millions of American students, families, and borrowers rely on to access higher education," said U.S. Secretary of Education Linda McMahon. "As the Federal student aid portfolio soars to nearly $1.7 trillion and with nearly a quarter of student loan borrowers in default, Americans know that the Department of Education has failed to effectively manage and deliver these critical programs. By leveraging Treasury's world-renowned expertise in finance and economic policy, we are confident that American students, borrowers, and taxpayers will finally have functioning programs after decades of mismanagement."

Under the new interagency agreement, Treasury will assume operational responsibility for collecting on defaulted Federal student loan debt and provide operational support to ED's efforts to return borrowers to repayment. In subsequent phases, Treasury will work to provide operational support over non-defaulted Federal student loan debt, to the extent practicable and permitted by law, while also seeking opportunities to provide operational support to FSA's other functions.

"Under President Trump's leadership we are undertaking the first serious effort to clean up a $1.7 trillion portfolio that has been badly mismanaged for years. Treasury has the unique experience, the operational capability, and the financial expertise to bring long overdue financial discipline to the program and be better stewards of taxpayer dollars," said U.S. Secretary of the Treasury Scott Bessent.

Throughout each phase of the partnership, ED, in conjunction with Treasury, will communicate directly with stakeholders, including students, parents, borrowers, institutions, and vendors, to outline anticipated plans and timelines and address any questions. Building on the Trump Administration's successful efforts to fix the Free Application for Federal Student Aid form, the agencies will ensure that the partnership is implemented effectively and enhances the delivery of Federal financial aid for students and families.

This agreement follows nine agency partnerships signed over the past year, including the workforce development partnership with the U.S. Department of Labor, which has created an integrated Federal education and workforce system and reduced the need for States to consult multiple agencies to effectively manage their programs.

View the Federal Student Assistance Partnership fact sheet here.