What Happens to Student Loans If Trump Abolishes the Department of Education?
President Trump has made no secret of his desire to dismantle the Department of Education and overhaul student loans. He has repeatedly called for eliminating the agency throughout his political career, arguing that education policy should be left to states and local governments. But what would that mean for federal student loans? Could borrowers see their debts wiped out if the DOE ceases to exist, or would they simply find themselves under new management?
Let’s break down what's possible—and what isn't.
Can President Trump Even Abolish the Department of Education?
The short answer: No, at least not unilaterally.
The DOE was created by Congress in 1979 and would need an act of Congress to be dismantled. A president cannot simply issue an executive order to eliminate the department. Even with Republican control of both chambers, such a move would face steep political and logistical hurdles. Past efforts to eliminate the DOE—including during Ronald Reagan's presidency—failed due to a lack of congressional support.
"You can’t just drop a bomb on the Department of Education and turn it into rubble," Jonathan E. Collins, a political science and education professor at Teachers College, Columbia University, told Time. "Legally, it has to start with Congress, not the president.”
Even if Congress did approve abolishing the department, the transition wouldn’t happen overnight. Federal agencies don't just disappear—they get absorbed, restructured or their responsibilities are reassigned. That insight is critical when it comes to understanding what would happen to student loans. In the case of the DOE, oversight of federal student loans would likely shift to another agency, such as the Treasury Department or a newly created entity.
Could Student Loans Be Cancelled For Student Loan Borrowers?
The federal student loan system is a financial obligation between borrowers and the government, with repayment terms legally binding through promissory notes. Eliminating the DOE wouldn't erase those obligations.
Here's what would likely happen instead:
Student Loans Would Transfer to Another Federal Agency
The most probable scenario is that the DOE’s responsibilities, including federal student loan servicing, would be handed off to the Department of the Treasury, the Consumer Financial Protection Bureau or another agency. Conservatives who are advocating for the DOE to be abolished recommend moving the Office of Federal Student Aid or FSA to the Treasury Department, “where it would continue to carry out the regular duties of doling out federal loans and recouping them.”
As Rick Hess, a senior fellow and director focused on education policy at the right-leaning American Enterprise Institute, told ABC News, “the FSA would be a better fit for the Treasury Department because it’s ‘essentially a mega-bank.’"
"It’d make more sense to have it overseen by officials at Treasury who work closely with financial institutions and oversee federal revenue collection," Hess said.
The upshot: Borrowers would continue making payments as usual, just under different oversight.
Student Loan Servicers Would Still Manage Repayments
The DOE doesn't directly handle loan payments, but private loan servicers do. Even if the department were abolished, these servicers would still be contracted to collect payments and assist borrowers.
Student Loan Forgiveness Programs Could Be at Risk
While student loan balances wouldn’t disappear, forgiveness programs like Public Service Loan Forgiveness and Income-Driven Repayment could be altered or eliminated under a new structure. If these programs are housed under the DOE and the department is dismantled, future forgiveness could become more burdensome to qualify for—or disappear entirely.
New Student Loans Would Still Be Issued—With Potential Changes
If federal student lending continues under a different agency, new loans could come with different terms. A Trump administration could push for privatization, shifting the program from direct government lending to bank-based loans, as before 2010.
The Upshot About Student Loans
Eliminating the Department of Education wouldn’t magically cancel student loans and debt. The federal government would own the loans, and borrowers would still be responsible for repayment. However, restructuring the department could significantly impact how loans are managed, who oversees them, and whether forgiveness programs remain intact.
The upshot for student loan borrowers: keep an eye on policy changes, but don't expect a disappearing DOE to mean disappearing student loan debt. If anything, a shift in oversight could bring new uncertainties—especially for those relying on forgiveness programs. As always, borrowers should stay informed, keep records of their payments, and be prepared to adjust to a changing landscape.
