One day after the White House officials declared that the education service would administer the student loan program, President Donald Trump announcement That the Small Business Administration would take control of the $ 1.7 billion portfolio.
He told the White House journalists that this decision would happen “immediately”, although he did not say how this process would work. Currently, federal law obliges the Department of Education to manage student loans, so that the president does not have the authority of moving, several experts and defenders said Friday.
Neither the White House nor the Small Business Administration responded to requests for more information or details on the plan.
In response to questions about how to move loans to SBA would work, the Department of Education has referred ED inside has an interview This education secretary, Linda McMahon, did Fox News on Friday. McMahon said she was working with SBA on a strategic plan.
The announcement follows Trump’s decree, Signed ThursdayOrdering McMahon to close its department “to the maximum extent of the law”. McMahon and others said that a smaller version of the department would focus on the basic functions, that many experts allegedly including the student loan program. (Trump also said on Friday that the Ministry of Health and Social Services would take up programs that support disabled students.)
Kelly Loeffler, who directs the SBA, written on social networks that his agency “is ready to take the initiative to restore the responsibility and integrity of the student loan portfolio in America”. The question of whether the ministry has the capacity to follow the program is an open question; Loeffler plans to reduce 43% of the staff, Politico and other media report. The SBA manages several programs to support small businesses, including the provision of loans and the resumption after claim.
The Department of Education issues around $ 100 billion in student loans each year and spends $ 30 billion in Pell grants. That Funding is crucial Students rely on the government to help pay the college.
But borrowers fought Over the years to navigate the heavy student loan system and often have encountered difficulties By reimbursing their loans. Meanwhile, the Federal Government’s growing loan portfolio has become A key problem For legislators on both sides of the political aisle. The corrective of former president Joe Biden was partly to make forgiveness for student loans more accessible and make loan payments more affordable.
Trump said on Friday that the loan system “will be much better than in the past”, adding, “it was a mess”.
Blind agency
Friday afternoon, it was not clear if the SBA would also take up the Pell grant program and the free demand for federal aid to students – a form on which millions of students count to access federal aid, students and institutional. Currently, the Office of Federal Student Aid, which is part of the Department of Education, administers these programs. This office was forehead harshly recent mass layoffs In the department, and the experts wondered if they could fulfill its many responsibilities, which also include supervision of colleges and eliminating fraud in the federal student aid system.
Trump executive decree stressed that the education department manages a portfolio the size of Wells Fargo but with much fewer employees. “The Ministry of Education is not a bank, and it must return the banking functions to an equipped entity to serve American students,” said the order.
A senior official in Federal Student Aid said on Friday that the office had been blinded by the announcement. One day before, the manager said, the plan was to move the loans to the Treasury service. The agency officials have not yet received plans or communication on the delivery of the reins to SBA or what it would imply, said the manager.
‘Clear violation’
The Federal Status that created The FSA specifically gives this office power to administer financial assistance programs to students. In addition, the laws dictate how federal funding is allocated explicitly sends money to the education of student assistance programs. A former member of the department of the department said ED inside that the administration “clearly bypasses the spirit and intention of the law if you were to go to functions”.
Senator Patty Murray, a Democrat in the state of Washington, agreed, writing on social networks that the announcement “is a clear violation of the Education Act (and) credits”.
Beth Maglione, interim president of the National Association of Student Financial Aid Administrators, added in a press release that only the congress can move the portfolio of student loans to another agency; If the legislative power agreed, it would take time.
“The administration should first articulate a definitive strategy describing how the work of administration of student assistance programs would be allocated within the SBA, to determine the endowment and the necessary resources and build the infrastructure required to facilitate the transition of these programs to another federal organization,” she said. “In the absence of any global plan, a serious concern remains: how will this restructuring be executed without disturbance of students and establishments?”
Not a “crazy idea”
Some conservative policy experts support the closure of the department have applauded this decision. Lindsey BurkeDirector of the Center for Education Policy at the Heritage Foundation, written on social networks That “Without student loans to Ed, he will no longer stay at the agency. Just a few programs – certainly not enough to justify an agency at the office level. ”
Beth Akers, a principal researcher at the American Enterprise Institute, such as the Heritage Foundation a conservative reflection group, recognized in an email to ED inside That there are many open questions on the functioning of the SBA movement. But she said the announcement shows that Trump administration understands that recent staff cuts “will probably make these programs too much administered differently,” she wrote.
Akers noted that since SBA currently manages its own loans, “it is not a crazy idea that they could succeed.”
“Frankly, the ministry has poorly managed the administration of student loans, so the bar is quite low on what would be an improvement,” she added. “I expect the existing student loan infrastructure (and remaining staff) to move to SBA, and there will be no immediate changes in the way these programs are executed. It’s my hope. Because if things change too quickly, I expect students to see disturbances that could affect their registrations and their personal finances. ”
Liam Knox contributed to this report.