The nation’s $1.7-trillion federal student-loan portfolio will be transferred immediately from the U.S. Department of Education to the Small Business Administration, whose staff is simultaneously being cut by 43 percent, the Trump administration announced in two separate statements Friday.
The developments — one conveyed in comments to reporters in the Oval Office on Friday, the other in a memo from the SBA — come on the heels of the president’s executive order Thursday directing Education Secretary Linda McMahon to begin closing the Education Department, a move that would require congressional approval.
The decision to shift the student-loan program drew immediate criticism from groups that questioned whether the administration has the authority to make that move and whether the SBA will have the capacity to take on the enormous task of overseeing a financial-aid system that has been mired in crisis.
In comments to reporters, the president said the SBA is ready. “They are all set for it, they are waiting for it. It’ll be serviced much better than it has in the past,” Trump said. However, the SBA’s own release on Friday didn’t mention the additional responsibilities, focusing instead on how its duties would be shrinking. The SBA said the reorganization “is targeted to reverse the broad and costly expansion of the SBA under the Biden Administration,” it said. An SBA press officer did not immediately return a request for comment about the addition of the financial-aid program to its duties.
Jessica Thompson, senior vice president of the Institute for College Access and Success (TICAS), criticized the move. “With no clear strategy, the administration has decimated staffing and oversight capabilities at both agencies while simultaneously announcing its intent to immediately transfer a more than $1.5-trillion loan portfolio between them,” she said in a written statement. “This can only result in borrowers experiencing erratic and inconsistent management of their federal student loans. Errors will prove costly to borrowers and ultimately, to taxpayers.”
Beth Maglione, interim president of the National Association of Student Financial Aid Administrators, also raised doubts about the move, which could be disruptive to students and families waiting to hear whether they’ve been accepted to colleges and will be receiving financial aid.
“It’s unclear whether transferring student-aid programs to another agency, such as SBA, can happen without congressional action, as the Higher Education Act specifically states that the Department of Education must administer Title IV student-aid programs,” Maglione wrote in a statement. Conflicting and unclear information from the administration, she said, is only adding to the uncertainties.
