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How will student loans be affected?
President Donald Trump signed an executive order titled “Improving Education Outcomes by Empowering Parents, States, and Communities” on March 20. The order called for the closure of the Department of Education.
Aside from its duties with K-12 education, the Department of Education also has responsibilities in higher education, the most prominent of which is its management of a student loan debt portfolio, which amounts to 1.6 trillion dollars, according to the executive order.
Many college students depend on scholarships and loans in order to pay their tuition. Lorelai Buckley, a college freshman at the University of Tennessee, Knoxville, shared whether or not the recent executive order has caused any anxiety about being able to afford her tuition.
“It has. I kind of rely on the scholarships and stuff I get from financial aid,” said Buckley.
In addition to state and private scholarships, Buckley also receives federal aid through subsidized and unsubsidized loans, as well as the Pell Grant. All of this federal aid is housed in the Department of Education.
Students like Buckley are left to wonder how the executive order will affect their federal student aid. This question does not have an immediate or simple answer. According to Scott White, a contributor at Forbes who specializes in education, financial aid processing could be heavily affected by recent job cuts within the department.
“Delays in processing financial aid applications could cause students to face difficulties in meeting tuition deadlines, leading to a delay in enrollment, class registration, or even students losing their places at schools,” said White.
As Adam Edelman, a politics reporter, pointed out in an NBC article, the department cannot actually be closed without congressional approval. However, the order does shift responsibility onto Secretary of Education Linda McMahon to manage the closure of the department, so plans for any changes to come will likely come from her.
As the Secretary of Education, McMahon released a statement regarding the executive order in which she promises that funds will not be cut off from college student loan borrowers.
“Closing the Department does not mean cutting off funds from those who depend on them – we will continue to support K-12 students, students with special needs, college student borrowers, and others who rely on essential programs,” said McMahon.
Additionally, Edelman’s article covers statements from White House press secretary Karoline Leavitt stating that student loans and Pell Grants would remain under the control of the Department of Education.
These statements are reassuring to students who rely on loans in order to attend college, but until the current administration releases a plan for exactly how the department will be shrunk or dismantled, it is difficult to completely assuage student fears.
In his executive order, President Trump states that the Department of Education should “return bank functions to an entity equipped to serve America’s students,” using Wells Fargo as a bank of comparable size to the Department of Education. This may be an indicator that the administration is looking to shift loans to the private sector. Since private loans are typically more expensive than federal loans, students looking to take out loans may have a tougher time paying back their student debt.
Within his executive order, President Trump tasks McMahon with maintaining the “uninterrupted delivery of services, programs, and benefits” housed under the Department of Education. However, Bianca Vásquez Toness, an Associated Press reporter, notes that interruption has already occurred and will likely continue.
“Users should expect some hiccups. The StudentAid.gov website was down for several hours last week as the remaining department staff tried to troubleshoot an outage,” said Toness.
These services may simply be moved to different departments, which would allow them to continue, although it runs the risk of putting more work on the recipient departments than they are able to effectively handle. Collin Binkley, a reporter who covers federal education policy, quotes Trump in an Associated Press article saying that the Small Business Administration will handle student loans in the future. He also includes an announcement from the Small Business Administration that it will be cutting 43% of its staff, which could mean that the department will not be staffed sufficiently to handle such a large loan portfolio.
