In a bold and controversial restructuring of federal education policy, President Donald Trump announced Friday that student loan programs and special needs services will be reassigned to different federal agencies. The move is part of the administration’s broader effort to dismantle the Department of Education.
According to Trump, the Small Business Administration (SBA) will now oversee the federal student loan portfolio, which currently totals $1.6 trillion in debt held by 43 million borrowers. Meanwhile, the Department of Health and Human Services (HHS), now led by Robert F. Kennedy Jr., will assume control over special education and nutrition programs.
“I’ve decided the SBA, headed by Kelly Loeffler, will handle the student loan portfolio,” Trump said during a press briefing. “It’s a very large and complicated deal, and I believe it will be serviced much better outside the Department of Education.”
The Department of Education’s Office of Federal Student Aid, which employs over 1,000 workers, currently administers the massive loan system. It remains unclear if or how those employees would be transferred under the SBA or whether the agency is equipped to manage the portfolio, especially given recent plans to cut 43% of its workforce.
Trump also confirmed that special education and school nutrition programs will be transferred to HHS. “Those two elements will be taken out of the Department of Education,” he said, acknowledging the complexity of the transition.
Despite the reorganization, Trump claimed that key education funding sources would remain untouched. “Pell Grants, Title I, and funding for special needs children will be fully preserved,” he said. “They’ll be redistributed to other departments that will take good care of them.”
However, the announcement has sparked immediate backlash from educators, legal experts, and policy advocates. Critics argue the decision could lead to widespread disruption, especially for student borrowers navigating repayments and forgiveness programs.
“Moving the student loan program to the SBA is illegal and unserious,” said Mike Pierce, Executive Director of the Student Borrower Protection Center. “It’s a clear attempt to distract from the fact that Trump has broken the student loan system.”
The move is also expected to trigger legal challenges. The Higher Education Act of 1965 mandates that the Department of Education and its Secretary administer federal student aid programs.
“The Office of Federal Student Aid is statutorily required to be under the Department of Education,” said Andrew Crook, spokesperson for the American Federation of Teachers. “It has the unique expertise to manage this complex system.”
AFT President Randi Weingarten issued a blunt response: “See you in court.”
Even some conservative analysts, such as Rick Hess of the American Enterprise Institute, expressed doubt about the legality of the shift, despite supporting broader reforms to federal education policy.
Trump’s announcement comes as the Department of Education undergoes deep staffing cuts, with nearly half its workforce eliminated. These changes, according to critics, will further erode the agency’s capacity to provide essential services.
Education Secretary Linda McMahon said she is working with Congress to either dismantle the agency entirely or reassign its responsibilities to other federal departments.
Former Obama administration official James Kvaal warned that a similar attempt to move loan services to the Treasury Department failed. “They ended up with higher costs and less effective collections,” he said. “This could have real-world consequences for millions of borrowers.”
Jessica Thompson of The Institute for College Access and Success added, “Borrowers are already facing a mountain of problems. This transition could result in inconsistent servicing and costly errors for borrowers and taxpayers alike.”
The administration says the changes are effective immediately, but observers say the lack of clarity, legal concerns, and potential operational hurdles mean the plan’s implementation is far from guaranteed.
With litigation looming and questions unanswered, the Trump administration’s education shake-up sets the stage for a contentious battle over the future of federal education programs.
