Many of the 42 million federal student loan debtors in the nation are probably anxious as the Trump administration looks for methods to shut down some or all of the U.S. Department of Education.
Underwriting the loans that allow millions of people to enroll in college and graduate school each year is one of the responsibilities of the Education Department. Additionally, it manages the nation’s $1.6 trillion in outstanding student loan debt.
According to Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit organization that assists borrowers with debt repayment, borrowers are currently experiencing a significant degree of concern.
According to analysts, a congressional act would be necessary to close the agency.
However, according to The Wall Street Journal, officials in the Trump administration are debating an executive order that may suspend certain aspects of the agency on Monday. President Donald Trump stated during his campaign that shutting down the department would be a top priority.
According to a White House official, the president intends to carry out a campaign pledge by reassessing the Department of Education’s future.
The U.S. Department of Education was founded in 1979 by former President Jimmy Carter. Since then, the department has faced other existential threats, including calls for its dissolution from former President Ronald Reagan and an attempt by President Trump to combine it with the Labor Department during his first term.
There will probably be opposition to the Trump administration’s attempts to destroy the Education Department.
According to a study by Data for Progress on behalf of the Student Borrower Protection Center and Groundwork Collaborative, 61% of likely voters say they are against the Trump administration using an executive order to dismantle the Education Department. Only 34% of respondents said they would support such a move. From January 31 to February 2, 1,294 participants participated in the survey.
Here are the potential effects on student loan holders of the department’s proposed reforms.
What would happen to my student loans?
According to Mayotte, student loan debt would still be owed even if the Education Department were to disappear.
The terms [of the loan] are unaffected by a change in the organization that oversees it, she stated.
For instance, millions of student loan holders recently had their accounts moved to a different servicer, and mortgages are frequently sold to other businesses, Mayotte continued.
According to Mayotte, the next most sensible department to handle student loan administration would be the Treasury Department.
According to a blog post by the National Association of Student Financial Aid Administrators, it’s also feasible that the Department of Labor or the Justice Department might do some of the duties performed by the Education Department.
According to higher education expert Mark Kantrowitz, some Republicans have indicated an interest in privatizing the federal student loan program. Consumer activists are concerned about this possibility, pointing out that students require additional protections not offered by private lenders.
According to Michele Shepard Zampini, senior director of college affordability at The Institute for College Access and Success, the federal student loan system is already beset with issues. According to her, moving tens of millions of people’s loan accounts to a different organization will simply exacerbate the situation.
According to Shepard Zampini, anarchy would result from the lack of stability that borrowers and students require.
There may be a delay in financial aid for both new and existing students.
According to Shepard Zampini, if the Education Department is partially or completely closed, there will probably be delays for both new and existing students who depend on financial help for college.
She stated that would be a big issue for families.
“Unfortunately, people cannot attend college without student loans,” Shepard Zampini stated.
Kantrowitz concurred.
Kantrowitz stated, “Disruption is bad, very bad.” Federal student funding may be unavailable for weeks or more during a transition.
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