What Happens to Student Loans If Trump Shuts Down the Education Department?

President Donald Trump campaigned on the idea of shutting down the U.S. Department of Education to move "education back to the states." He pledged he was going to "do it fast."

Now, less than 60 days into his second term, Trump appears to be moving quickly to fulfill that promise. According to the Wall Street Journal, the president's team is preparing an executive order that aims to dismantle much of the department.

The Education Department, which does not establish federal curriculum for schools, provides roughly 10% of K-12 funding and enforces federal civil rights for students. It plays a much larger role in financing higher education. Managing approximately $1.5 trillion in student loan debt for over 40 million borrowers, the Education Department represents one of the largest holders of consumer debt in the country.

The Wall Street Journal report noted the draft of the executive order that its reporters viewed was "pre-decisional," meaning that it could change — or be scrapped altogether. White House Press Secretary Karoline Leavitt called the Journal's story "fake news" on the social media platform X Thursday, saying that the president had no plans to unveil the executive order "today," she said, without elaborating whether the order is slated to be signed at a later date.

News of the executive order comes just days after the Senate confirmed Linda McMahon, the billionaire businesswoman behind the World Wrestling Entertainment franchise, as Trump's Secretary of Education. In her first hours as secretary on Monday, McMahon sent out an email to Education Department staff outlining a "final mission" for the department, Politico reported.

The mission includes the "elimination of bureaucratic bloat," which McMahon wrote would "profoundly impact staff, budgets, and agency operations." In the coming months, she continued, the department will be working with Congress and other federal agencies to scale down and move some of its services to other areas of government.

Could Trump shut down the Education Department?

Experts warn that disbanding the department would have unforeseen rippling effects not just on K-12 and higher education but the economy in general — if it were to happen.

“Eliminating the U.S. Department of Education is extremely unlikely,” Michael Itzkowitz, president of the education consulting firm HEA Group, told Money in November.

Itzkowitz, a former Obama-appointed Education Department official, said that Trump can’t dissolve the department on his own. Congress would have to pass a law to do so — and that would need support from Democratic Senators to reach the 60-vote threshold to overcome the filibuster.

That said, it has technically been done before. The current iteration of the Education Department was created by former President Jimmy Carter, opening in 1980. But that wasn’t the first Education Department.

More than a century prior, President Andrew Johnson’s administration created an Education Department during the Reconstruction Era in 1867. By 1869, the agency was all but shuttered. Congress shrunk its funding and the department merged with the Department of Interior, becoming the Bureau of Education.

The argument then was much the same as it is today: Opponents of the department say it is wasteful and ineffective, and that states should solely manage their own education programs.

Project 2025, a conservative policy wish list from lobbyists in Trump's orbit, makes that argument almost verbatim.

“Federal education policy should be limited and, ultimately, the federal Department of Education should be eliminated,” wrote Lindsey Burke in Project 2025’s education policy section.

Burke, who is the director of education policy at the Heritage Foundation, goes on to say that states and local governments should have direct control over all federal education funding. And that families should have education savings accounts that they could contribute to and apply toward a host of education options.

Where would $1.5 trillion of federal student debt go?

If legislation to close the Education Department were successful, a major question that would need to be addressed is: What would happen to all that student loan debt?

Trump has not addressed this question directly, but loans would almost certainly not be forgiven, as some wishful theories have posited on social media lately.

Project 2025 offers one possible path forward.

The conservative playbook recommends that the Education Department’s current Office of Federal Student Aid be transformed into an entity with a board of trustees appointed by the president. This group would oversee the federal student loan portfolio on behalf of the U.S. Department of the Treasury.

The Treasury Department, under this proposal, would oversee payment collections, defaults and borrower relations of federal student loans, much like the IRS does with federal income taxes.

It's not clear whether Trump would follow this strategy, as Trump has sought to distance himself from Project 2025. Both Trump and Vance, however, have several ties to project's authors and the Heritage Foundation, the conservative think tank behind Project 2025.

For instance, Vance wrote the foreword for a new book by the Heritage Foundation's president, calling the think tank “the most influential engine of ideas for Republicans from Ronald Reagan to Donald Trump."

And a Project 2025 author, Russ Vought, is a key part of Trump's cabinet. He works as the director of the federal government's human resources department — the Office of Management and Budget — and acted briefly as the head of the Consumer Financial Protection Bureau, which the Trump administration is also actively trying to dismantle.

What to expect from a Trump Education Department

Although Trump will not have unilateral control to disband the Education Department, he has significant power to influence how it operates.

Installing McMahon as the new secretary is the first major step, and a formal executive order to pursue ways to pull apart the Education Department's key services would be another — if such an order is implemented.

Under Trump and McMahon, the day-to-day priorities of the department are expected to take a 180.

“We're likely to see a repeat of Trump's first term,” Itzkowitz said in a November interview. “Generally, this involved scaling back any and all regulations put in place by the Obama or Biden administrations."

Former President Joe Biden put significant emphasis on student loan forgiveness through Public Service Loan Forgiveness (PSLF) and income-driven repayment (IDR) options. For instance, Biden created an all-new repayment plan called the SAVE plan, which sought to forgive remaining student debt after borrowers made at least 10 years of qualifying payments. In the meantime, it set millions of borrowers’ monthly payments to $0.

SAVE is currently on hold as it’s being challenged in federal court, and it appears likely that the plan will be struck down. Even if it survives the legal challenge, Itzkowitz said the Trump administration could simply divert resources from it as well as PSLF, without any Congressional action required. In Trump's first term, for example, his budget requests called for slashing funding for multiple federal student aid programs, including PSLF.

In that case, a lot of current student loan benefits at the Education Department could face death by neglect — regardless of what happens with the department overall.

“It’s likely that the [Trump] administration will abandon forgiveness programs,” he said, “whenever and wherever possible.”

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