Student Loans: Here’s What Happens As Trump Dismantles Education Department

The Trump administration is accelerating its plan to dismantle the U.S. Education Department, shifting billions of dollars in federal school grants to other agencies — but leaving the nation’s $1.6 trillion student loan system in place, at least for now.
Under a series of new agreements, major K-12 and higher education grant programs will move to the Departments of Labor, Health and Human Services, Interior and State even as the Education Department continues to oversee federal student loans and college accreditation.
The split underscores the limits of President Donald Trump’s effort to eliminate the department, a goal he first announced in a March executive action. Millions of borrowers will still use the Education Department for repayment plans, loan forgiveness and aid eligibility, even as its footprint shrinks dramatically elsewhere.
Six newly signed agreements represent the most sweeping transfer of the department’s responsibilities in its 45-year history. Labor will inherit some of the largest federal funding streams for schools, including the $18 billion Title I program for low-income communities, as well as grants for teacher training, English language instruction and the TRIO college-access program. HHS will take over a grant program for student parents and foreign medical school accreditation, while State will oversee foreign language programs and Interior will manage Native American education initiatives. Officials say the programs will continue to be funded at levels set by Congress.
Education Secretary Linda McMahon said the moves are part of a “bold action to break up the federal education bureaucracy and return education to the states.” Since spring, the department has shed hundreds of staff through layoffs and early retirements, and officials say the new transfers are designed to prove the system can function without a standalone federal agency. The Education Department tested the approach in June by shifting adult education programs to the Labor Department; the new agreements go much further, effectively outsourcing its Office of Elementary and Secondary Education and most of its Office of Postsecondary Education.
But critics warn that dismantling the department could disrupt programs serving vulnerable students and leave key responsibilities in the hands of agencies without education expertise. Some legal scholars also question whether the Trump administration has the authority to shift programs that federal law requires the Education Department to manage directly. McMahon has dismissed those criticisms, arguing the agency has become a “bloated bureaucracy” while student performance lags.
The administration’s long-term goal remains persuading Congress to codify the transfers — a necessary step for fully eliminating the department. Until then, while much of the agency’s work disperses across Washington, the student loan system will remain firmly under its control, ensuring borrowers continue to rely on the department even as its broader mission recedes.
This is a breaking news story. Updates to follow.
This article includes reporting by the Associated Press.