'That's not their business': Trump says Education Dept. shouldn't handle student loans
It's a major challenge to the Trump administration's plans to dismantle the Education Department: How to transfer the loan accounts of over 40 million people
One of the many challenges the Trump administration faces in its plans to dismantle the U.S. Department of Education: The office manages the federal student loans of more than 40 million people.
Earlier this month, President Donald Trump told reporters that the loan accounts should be overseen by another agency.
"I don't think the Education [Department] should be handling the loans," Trump said. "That's not their business."
Here's what borrowers need to know about the possible change.
SBA, Commerce or Treasury could take student loans
Trump alone can't shutter the U.S. Department of Education, experts say. Closing the agency would require an act of Congress.
Still, Trump could move some of the Department's functions to other agencies. He said his administration was looking to task the Treasury Department, Commerce Department or the Small Business Administration with federal student loan management.
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Experts say the most logical agency would be Treasury Department, since it already plays a role in collecting past-due debts from Americans through the Treasury Offset Program.
Meanwhile, "Neither Commerce nor SBA has any relevant experience," higher education expert Mark Kantrowitz said.
Student debt transfer could lead to major disruptions
Transferring the loan accounts of tens of millions of people to another agency would only worsen an already troubled lending system, said Michele Shepard Zampini, senior director of college affordability at The Institute For College Access and Success.
Federal student loan borrowers complain about inaccurate bills, trouble reaching their servicers and being denied relief for which they're eligible.
"Borrowers and students need more stability, and this would create chaos," Shepard Zampini said in a previous interview with CNBC.
Moving the student loans to another agency "could take a few months," Kantrowitz said. In the meantime, borrowers might find it impossible to get their loan forgiveness applications processed under both the Public Service Loan Forgiveness program and income-driven repayment plans.
However, the terms and conditions of your federal student loans will not change even if the agency overseeing them does, Kantrowitz said. Borrowers' rights were guaranteed when they signed the master promissory note when their loans were originated, he added.
This story originally appeared on: CNBC - Author:Annie Nova
