Trump unveils plan for SBA to manage student loans amid Education Department shake-up

President Donald Trump announced on Friday that the Small Business Administration (SBA) will assume control of the Department of Education’s massive student loan portfolio, as part of his broader effort to dismantle the agency and shift greater power over education to the 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 told reporters in the Oval Office. He added that the Department of Health and Human Services will take the lead on funding initiatives for students with special needs.

The move comes amid longstanding uncertainty over the future management of a portfolio totaling approximately $1.8 trillion in debt – one of the largest in the country. Trump’s decision follows previous suggestions that the portfolio might be transferred to either the Treasury Department or the SBA. Earlier in the month, Trump had floated the idea that Loeffler “would really like” the portfolio, although earlier discussions had stalled.

In a surprising development, the SBA is simultaneously implementing significant cuts, with CEO Kelly Loeffler announcing a reduction of around 43% of its workforce—roughly 2,700 positions—raising concerns about its capacity to manage such a large portfolio. According to sources familiar with the matter, nearly 40% of the student loans are currently in arrears, which experts warn could trigger an avalanche of new defaults as borrowers adjust to the end of a multi-year pause on payments and changes to more affordable payment programs.

The Education Department has long struggled to find a viable alternative to manage its student debt, and the latest proposal represents a dramatic reorganization of federal oversight in this critical area. Hours before Trump signed an executive order directing Education Secretary Linda McMahon to begin dismantling the agency, White House press secretary Karoline Leavitt stated that the department would retain the student loan portfolio. However, as the order was signed, Trump clarified that the department’s functions would be redistributed among other agencies, without specifying further details.

“The SBA is prepared to work with Congress and the Administration to bring accountability back to America’s student loan program,” Loeffler said in a statement posted on X, citing the agency’s experience as the government’s largest guarantor of business loans.

Critics warn that the transition could be disruptive for millions of borrowers. “It’s a tidal wave coming for an unprepared village,” remarked a former senior Education Department employee who recently departed, speaking to CNN. “The fallout is not even hypothetical now.”

With efforts to restructure federal education policy underway, the fate of the nation’s student loan portfolio remains uncertain, raising questions about the long-term impact on borrowers and the broader financial system.

Copied