President Trump’s decision to transfer the federal student loan program from the Department of Education to the Small Business Administration (SBA) has alarmed borrowers and experts, who see it as further evidence that the administration lacks a concrete plan for dismantling the Education Department.
Trump signed an executive order on Thursday aimed at winding down the department, announcing that student loans would shift to the SBA the following day—coinciding with the agency’s announcement that it would cut 40% of its workforce.
While many have long criticized the student loan system, experts warn that placing the program under an agency with no experience handling student debt—especially amid major layoffs—will create more problems than it solves.
“No Background, No Plan”
“Borrowers right now are already experiencing an unprecedented level of chaos and uncertainty,” said Aissa Canchola Bañez, policy director at the Student Borrower Protection Center.
Moving student loans to the SBA, which “has no background of familiarity with the student loan program [or] the rights afforded to student loan borrowers under the Higher Education Act, will only make things worse,” she added.
Trump also announced that programs for students with disabilities would shift to the Department of Health and Human Services but provided no details on logistics for student loan borrowers.
Despite concerns, both the SBA and the Education Department welcomed the move.
“Whether it’s a loan for a business or a business degree, SBA is prepared to restore efficiency and accountability to our taxpayer-funded loan programs,” said SBA head Kelly Loeffler in a post on X.
At the same time, Loeffler confirmed that the administration planned to cut about 2,700 positions from the SBA’s nearly 6,500-member workforce.
Jessica Thompson, senior vice president at the Institute for College Access & Success, called the move reckless.
“All of this just really underscores that there has been no planning. There is no plan, and that is the most scary, frankly, and dangerous thing about this,” she said. “Because 44-plus million people owe money to the federal government from their student loans, and they are already in a state of confusion.”
Thompson stressed that transferring such a major program requires careful planning and congressional involvement.
A Department of Education spokesperson sought to calm concerns, stating that “no changes have been made yet, so there are no changes for student loan borrowers to navigate at this time.”
Borrowers Advised to Take Precautions
Advocates are urging borrowers to reach out to their loan officers and document all repayment efforts. The Department of Education has also slashed about half its workforce, adding to fears that servicing issues will worsen.
“I don’t know what element of the federal government I want chaos to be in, but I think one of the last places is federal student aid,” said James Murphy, director of career pathways and postsecondary policy at Education Reform Now. “That directly affects millions and millions of people in a very real way—paying for college and managing their loans.”
Borrowers are already in limbo as the Trump administration seeks to roll back student loan forgiveness programs established or expanded under former President Biden.
About 8 million borrowers are currently in forbearance under Biden’s Saving on Valuable Education (SAVE) income-driven repayment plan, which was ruled illegal by a court last month. Following the ruling, the Trump administration halted applications for all IDR plans, and although the Education Department promised to restore access soon, it has yet to do so.
“This Is the Wild West”
“There’s no good advice, and any expert giving advice doesn’t know what he’s talking about,” said Alan Collinge, founder of Student Loan Justice. “This is the Wild West. Right now, borrowers have zero power, and we’re being pushed around on a chessboard like pawns.”
Collinge believes the Trump administration is deliberately destabilizing the student loan system to devalue it before selling it to a third party.
Canchola Bañez advised borrowers to take three key steps:
- Download their full payment history from the Federal Student Aid portal.
- Screenshot any tracking information for loan forgiveness plans.
- Contact members of Congress for assistance.
“Members of Congress have entire teams dedicated to helping constituents with federal agencies,” she said. “Borrowers should demand that their representatives start working on their behalf, especially if they’re not getting answers from the department.”