President Trump continued his push to unwind the U.S. Department of Education on Friday, announcing that the management of the entire federal student loan portfolio and of the department's "special needs" programs would be moved to other federal agencies immediately.
Appearing in the Oval Office with Defense Secretary Pete Hegseth, Trump said, "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. We have a portfolio that's very large," Trump said.
The federal student loan portfolio — which includes about $1.6 trillion in loans for roughly 43 million borrowers — is currently overseen by the Education Department's office of Federal Student Aid (FSA). That office has been gutted by the recent raft of buyouts, early retirements and last week's broad reduction-in-force.
It was not clear, based on Trump's announcement, how or if the remaining employees and expertise at FSA would be transferred to the Small Business Administration.
Trump said he would move student loans "out of the Department of Education immediately" and that Loeffler and her staff are "all set for it. They're waiting for it. It'll be serviced much better than it has in the past. It's been a mess."
Some 8 million federal student loan borrowers are currently in legal limbo, not making loan payments, because their Biden-era repayment plan was frozen by a judge for being potentially illegal. Borrowers also can't currently enroll in any of the federal government's income-driven repayment plans, though that is expected to change soon.
In a statement, Loeffler said, "As the government's largest guarantor of business loans, the SBA stands ready to deploy its resources and expertise on behalf of America's taxpayers and students."
But those resources are about to take a big hit as well, as the SBA also announced on Friday that it plans to cut its workforce by more than 40%.
Multiple sources at FSA who could not speak publicly for fear of retribution said they were blindsided by the news.
Logistical challenges aside, the role of the office of Federal Student Aid as the administrator of the student loan portfolio is protected by law. It's not clear how these responsibilities could be legally moved without a vote of Congress.
In a statement, White House press secretary Karoline Leavitt acknowledged, "The President has always said Congress has a role to play in this effort, and we expect them to help the President deliver."
As recently as Thursday, Leavitt had assured reporters that, "when it comes to student loans and Pell Grants, those will still be run out of the Department of Education."
Changes to oversight of 'special needs' remain unclear
After announcing these potential changes to the federal student loan portfolio, Trump then said, "Bobby Kennedy, the Health and Human Services [secretary], will be handling special needs," referring to cabinet member Robert F. Kennedy.
This appears to be a reference to the federal law known as the Individuals with Disabilities Education Act (IDEA), which the Education Department administers. The law guarantees students with disabilities the right to a free, appropriate education and, in 2024, sent roughly $15 billion to schools to help pay for special education services. The law also makes clear that it is the secretary of education's responsibility to administer these funds.
In a post on Bluesky, Sen. Patty Murray, D-Wash., called the potential changes "a clear violation of education & appropriations law."
The Education Department has a dedicated Office of Special Education and Rehabilitative Services, and, as with the federal student loan portfolio, it's unclear how these collective responsibilities on behalf of children with disabilities could be moved legally without a vote of Congress.
In a post on X, Health and Human Services Secretary Kennedy said his agency "is fully prepared to take on the responsibility of supporting individuals with special needs."
Not everyone was convinced.
"This is not a minor bureaucratic reorganization — it is a fundamental redefinition of how our country treats children with disabilities," said Keri Rodrigues, president of the National Parents Union, which represents more than 1,800 parent organizations across the country.
The news comes a day after Trump signed an executive order calling on Secretary of Education Linda McMahon to "take all necessary steps to facilitate the closure of the Department of Education."
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