Student Loans Amidst Dept. of Ed. Downsizing

 by Katherine O'Brien, MA, Certified College Planning Specialist, Founder and CEO of Celtic College Consultants, providing expert knowledge on the journey to college since 2004.

30-40% of college students take out student loans. Consequently, recent drastic personnel changes at the department of education have caused many people anxiety.

With half of the Department of Education (DOE) gone, questions about federal student loan programs abound. At this time, while President Trump said he wants to move the federal student loan system to the Small Business Administration (SBA), no executive order has been signed. However, such a move would likely require an act of Congress and could breach existing borrower contracts, leaving the plan vulnerable to lawsuits.

The Department of Education remains legally responsible for managing student loan programs under the Higher Education Act of 1965 (HEA). Until Congress acts, that legal authority cannot be transferred to another federal agency.

Even if enacted, any transfer from the DOE to the SBA would take months (or years) to happen and would not change current repayment terms or borrower obligations. At the same time, the SBA is also facing significant staff reductions of its own. Last week, it was announced that the SBA would cut its workforce by 40%. After those cuts, the agency may not have the capacity to absorb the complex and demanding responsibilities that comprise management of the federal student loan and collection programs.

Despite the headlines, student loan borrowers should know that nothing has changed for now. The Department of Education remains the legal administrator of federal student loans. The terms of existing loans remain in place. No loan transfers are happening, and no payments are due to the SBA.

Even if the administration wanted to shift the loans to the SBA, it may not be able to do so without Congress amending the HEA or passing a new law.

Be Careful!

In times of uncertainty, scams become more prevalent. Be sure to consult official sources of information and work with credentialed, seasoned professionals like myself.