President Donald Trump announced Friday that the Small Business Administration (SBA) will take over the Department of Education's massive student loan portfolio, a move that comes amid efforts to dismantle the agency and shift more control over education to states.
"I've decided that the SBA, the Small Business Administration, headed by Kelly Loeffler, a terrific person, will handle all of the student loan portfolio," Trump said from the Oval Office.
He also stated that the Department of Health and Human Services will take responsibility for special education funding.
The student loan portfolio, which totals approximately $1.8 trillion, is one of the largest financial holdings in the country, surpassing the assets of most US banks, CNN said.
The transfer has sparked concerns about how the SBA, traditionally focused on small business loans, will manage the complex system of federal student aid.
At the same time, the SBA is undergoing significant reductions in staff. Administrator Kelly Loeffler announced that the agency will cut 43% of its workforce, eliminating roughly 2,700 positions.
These cuts raise questions about the agency's ability to handle student loans, especially as the Education Department already struggled with servicing borrowers effectively.
With fewer employees managing the system, experts warn that disruptions are likely. Many borrowers are still adjusting to the resumption of loan payments following the pandemic-era pause, and nearly 40% of federal student loans are already behind on payments.
"It's a tidal wave coming for an unprepared village," said a former senior Education Department official. "The fallout is not even hypothetical now."
Trump announces that the Small Business Administration will immediately handle all federal student loans, and RFK Jr is now in charge of "handling special needs and all of the nutrition programs and everything else." pic.twitter.com/m6wGHdGl0i
— Aaron Rupar (@atrupar) March 21, 2025
Read more: Trump Pauses Tariff Hike on Canadian Metals After Ontario Freezes Electricity Price Increase
Confusion Over Student Loan Management Grows as Trump Reallocates Oversight
The decision to move the portfolio to the SBA follows a period of uncertainty about its management.
Earlier this month, Trump hinted that the Treasury Department could take over the portfolio, but discussions did not progress.
On Thursday, White House press secretary Karoline Leavitt stated that the Education Department would retain student loans, only for Trump to contradict that shortly after by signing an executive order reallocating responsibilities to other agencies.
This shift is part of Trump's broader plan to dismantle the Department of Education, a campaign promise that has been met with both support and opposition.
His executive order directs Education Secretary Linda McMahon to begin closing the department and returning control of education policies to state governments.
While Congress would need to formally approve shutting down the department, the administration's plan is already reducing its workforce and functions.
The transition raises serious concerns about how the SBA will handle repayment plans, borrower assistance, and potential defaults.
According to USA Today, the agency has limited experience managing federal student loans, and it faced criticism during the COVID-19 pandemic for distributing over $200 billion in potentially fraudulent relief loans.
Colleges and universities are already reporting backlogs as federal student aid employees face layoffs.
High school seniors applying for aid may also experience delays and confusion regarding loan applications and disbursements.
While Trump assures that the SBA is "all set" for the transition, the coming months will determine how smoothly the agency can take on this massive financial responsibility and whether borrowers will face new challenges in managing their debt.
Join the Conversation