President Donald Trump has called for the U.S. Department of Education to be completely eliminated, and he may issue an executive order in the coming days to make that happen. But a formal closure of the department may not be necessary to significantly disrupt key operations, including overseeing federal student loan forgiveness and repayment programs.
The Trump administration has already taken major steps to dismantle the department from within, including by placing many employees on leave. More substantial reductions in staffing, funding, and operations appear to be imminent. And with the likelihood increasing of a broader federal government shutdown, the department’s activities may be further diminished in just a matter of weeks.
Here’s what student loan borrowers should know as the Department of Education plunges deeper into crisis.
The Department Of Education Is Already Being Dismantled, Impacting Student Loan Operations
Most legal scholars agree that President Trump cannot simply eliminate the Department of Education through executive action. The department was established by Congress under President Carter in 1979, and it would take an act of Congress to abolish it.
But as a practical matter, the department is effectively being dismantled from within. The Trump administration, via the Department of Government Efficiency (commonly referred to as DOGE), has already taken steps to reduce staffing. According to USA Today, more than 100 staffers at the Office of Federal Student Aid – which oversees the federal student loan system, including repayment and student loan forgiveness programs – accepted buyout offers last month. This represents 10% of FSA staff, and includes those who worked in the Borrower Defense to Repayment unit (which reviews applications for student loan forgiveness for borrowers who claim they were misled or defrauded by their school) and the Ombudsman Group (which investigates disputes about student loan forgiveness and repayment programs).
More significant staffing reductions may be coming. The Department of Education has warned of a more widespread reduction in the workforce, and offered employees an incentive of up to $25,000 to leave their jobs. The deadline to accept that offer was on Monday of this week.
Meanwhile, Trump administration officials are eyeing major cuts to Department of Education services and operations. According to Marketwatch, proposals include slashing student loan servicing contracts (which handle much of the day-to-day operations of running the federal student loan system), decreasing call center hours, allowing for more dropped calls when borrowers contact FSA with questions about student loan forgiveness and repayment programs, and halting planned improvements to the department’s StudentAid.gov website. Student loan borrowers already experience long called hold times, dropped calls, and website problems, and advocates warn that further disruptions could essentially break the system.
Broader Government Shutdown Could Impact The Department of Education And Student Loan Programs
But the situation may get even worse, and soon. Recent reporting indicates that there is an increasing likelihood that the federal government will shut down in two weeks, as Congress appears to be on course to let government funding lapse. The Department of Education would be directly impacted by a shutdown.
Although Republicans control the House, the Senate, and the White House, they only have narrow majorities, and some Republican hardliners may refuse to support any government funding bill. As a result, Republicans will likely need to rely on at least some Democratic votes to pass a bill to extend government funding, which is set to lapse by March 14th. Democrats are demanding that any spending bill include language binding the Trump administration to Congress’s funding directives, because they are concerned that President Trump and DOGE will simply ignore the law and cut federal programs authorized and mandated by Congress. Republican lawmakers, however, are refusing to include any such language in the funding bill. If they cannot come to an agreement, the government will shut down in less than two weeks.
A full government shutdown may accelerate the decline of the Department of Education. Non-essential staff would not be able to work, while staff deemed to be essential would have to work without pay. This will impact an already-strained federal student loan system, potentially leading to even lengthier call hold times, more extensive application processing delays, and other disruptions. The longer the shutdown lasts, the more likely it is that the problems will be long-lasting due to backlogs. And given the existing employment pressures, more employees may start to voluntarily leave the department.
Student Loan Borrowers Already Facing Major Disruptions Due To Department Of Education Actions
The eroding of Department of Education operations could not come at a worse time for student loan borrowers, who are already experiencing significant disruptions.
Last week, the department shut down application processing for income-driven repayment, or IDR, plans, in response to a recent court order related to an ongoing legal challenge. IDR plans allow borrowers to have affordable monthly payments and a pathway to eventual student loan forgiveness; IDR programs are also usually a required component of the Public Service Loan Forgiveness program, a popular student loan forgiveness program for public and nonprofit employees. The shutdown of IDR processing will have major impacts for millions of borrowers, forcing many into unaffordable repayment plans or costly forbearances, while halting progress toward loan forgiveness.
Meanwhile, other federal student loan programs are also facing challenges. The Total and Permanent Disability discharge program, which provides for complete loan forgiveness for borrowers with severe medical impairments, has been paused since January as the department undergoes a significant servicing platform transition for the program. The TPD Discharge program was expected to reopen this spring, but continued cuts to department funding and staffing, and a potentially prolonged government shutdown, may impact that timeline and borrowers’ ability to get their student loans discharged under the program. And with staffing at the Office of Federal Student Aid experiencing severe cuts, processing for other student loan relief programs such as Borrower Defense to Repayment and PSLF Buyback has also been impacted by major delays that are unlikely to improve anytime soon.
On Monday, the Senate voted to confirm Linda McMahon as Secretary of Education. While McMahon promised during her confirmation hearing to uphold key federal student loan forgiveness programs authorized by Congress, such as PSLF and IBR, she also promised to enact President Trump’s agenda for the Department of Education. It remains to be seen how far the administration will go, and how disruptive the next several months will be for student loan borrowers.