President Donald Trump has long said he planned to dismantle the U.S. Department of Education (ED). In November, his plan took shape, as the ED announced that four government agencies would take over the different duties of the ED.
The goal of the dismantlement of the ED is to streamline federal education activities and reduce costs, but the change will significantly affect both current students and future student loan borrowers.
What Changes Are Coming to the U.S. Department of Education
In November, the ED issued a press release announcing six new interagency agreements (IAA) with four agencies. Going forward, the partnerships with the Department of Labor (DOL), Interior (DOI), Health and Human Services (HHS), and State will handle some of the key functions of the ED.
“The Trump Administration is taking bold action to break up the federal education bureaucracy and return education to the states,” said U.S. Secretary of Education Linda McMahon in the press release. “Cutting through layers of red tape in Washington is one essential piece of our final mission.”
Despite those changes, many of the core functions of the ED — such as managing the federal student loan system and providing funding to colleges and universities — will still occur.
Here is what you need to know about these changes and the impact on higher education:
Colleges and Universities Will Still Receive Funding
Although U.S. colleges and universities are mainly funded with state, private, and local money, the federal government does provide billions of aid to state and local education agencies. The ED said that these programs will continue to be funded, but the money may come from one of the partnering federal agencies in the future. For example, the DOL will handle adult education programs.
Disability-Related Functions Are Unchanged
The ED provides funding to schools to provide educational support for students with disabilities. Although Secretary McMahon and President Trump have said they feel the HHS is likely a better fit for handling those funds, the ED will continue to handle disability-related funding for now.
The FAFSA Is Still Available
The Free Application for Federal Student Aid (FAFSA), the critical first step students must complete to apply for financial aid for postsecondary education, will still be available. Currently available online at FAFSA.gov, the form is unchanged for the 2026-2027 academic year.
Federal Student Loans Will Remain with the ED (For Now)
The ED handles $1.7 trillion in outstanding federal student loans. Right now, the federal student loan portfolio will be unaffected by the changes; the ED will continue to handle the loan program. However, Secretary McMahon and President Trump have said that they think other departments may be better suited to handling federal student loans, such as the Department of Treasury.
There May Be Loan Servicing Issues
Although the ED will still handle federal student loans and federal Pell Grants, the dismantlement of the ED and the layoffs from earlier this year has caused some administrative and customer service issues, according to the Associated Press:
- Backlog of income-driven repayment (IDR) applications: The ED temporarily paused IDR applications, leading to a huge backlog of applications awaiting processing. In the meantime, the pause on loan repayment options led to millions of borrowers uncertain of how to manage their payments.
- Public Service Loan Forgiveness (PSLF): Those pursuing student loan forgiveness through PSLF could use the BuyBack program to get credit for past periods of employment. However, the BuyBack program has a huge backlog, with some borrowers seeing delays of months.
- Total and Permanent Disability Discharge (TPDD) disruptions: TPDD was transferred to another loan servicer and processing system. Since then, the system has experienced significant disruptions, such as a freeze on applications and delays on application processing.
Managing Student Loans
The dismantlement of the ED will affect both current and future students and borrowers with outstanding federal student loans. While federal financial aid programs are still available, how they’re handled and program management will change.
As these changes occur, you can contact your federal loan servicer with any questions you may have about your loans, repayment plan, and loan forgiveness eligibility.
FAQs
I have outstanding federal loans; if the Department of Education is dismantled, are my loans forgiven?
If the ED is dismantled, federal student loans won’t disappear, and borrowers won’t qualify for blanket loan forgiveness. The loan program may be shifted to other agencies, but the switch won’t affect borrowers’ obligation to repay the loans.
Do I still have to repay my federal student loans?
Yes, you still have to make your scheduled federal student loan payments. Even if the ED is dismantled, payments are still due, so make your payments on time to avoid late fees and negative credit reporting.
Is student loan debt being cancelled?
No, the dismantlement of the ED will not lead to widespread student loan cancellation.
