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Trump Moves Student Loans to SBA the Same Day the Agency Slashes Its Staff
In a surprising move, President Donald Trump announced on Friday, March 21, 2025, that the Small Business Administration (SBA) will take over the management of federal student loans from the Department of Education. This shift comes just one day after Trump signed an executive order to close the Department of Education, marking a significant step in his broader plan to dismantle the agency.
Trump, who made the announcement publicly, emphasized that the SBA, now led by Kelly Loeffler, will handle “all of the student loan portfolio.” He described the loans as “very large” and “pretty complicated,” but his characterization notably understated the scope of the federal student loan program. The Federal Student Aid Office currently manages $1.6 trillion in loans for 43 million borrowers, far exceeding Trump’s reference to “tens of thousands of loans.”
The timing of the announcement has raised eyebrows. On the same day, the SBA revealed plans to cut its workforce by 43%, eliminating approximately 2,700 positions from its nearly 6,500 active employees. The reductions will occur through voluntary resignations, the expiration of COVID-era and other term appointments, and a limited number of layoffs.
Education advocates and policy experts have expressed concern about the implications of transferring such a massive loan portfolio to an agency that is simultaneously downsizing. Critics argue that this move could create chaos and confusion for millions of borrowers who rely on these programs for higher education funding.
Legal challenges are already anticipated. The Higher Education Act of 1965 mandates that the Federal Student Aid Office operate under the secretary of education, not the SBA. Andrew Crook, press secretary for the American Federation of Teachers, emphasized, “Congress has charged the secretary of education with administering the federal student aid program.”
Critics, including Mike Pierce, Executive Director of the Student Borrower Protection Center, have condemned the move as “illegal, unserious, and a clear attempt to distract the public from the fact that Trump has broken the student loan system.” Pierce and others question how the SBA, with its reduced workforce, will manage the enormous responsibility of overseeing $1.6 trillion in loans.
Uncertainty lingers about the fate of current Federal Student Aid Office employees and how the SBA plans to handle the influx of loans. This move is part of Trump’s broader effort to dismantle the Department of Education, with other functions being redistributed to agencies like the Department of Health and Human Services, which will now oversee special needs and nutrition programs.
As the details of this transition remain unclear, one thing is certain: the shift of federal student loans to the SBA has sparked widespread concern about the future of student debt management in the U.S. The coming weeks and months will be critical in determining whether this move will bring stability or chaos to the nation’s education system.
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Trump’s SBA Takeover of Student Loans Sparks Widespread Concern
The decision to transfer federal student loans to the SBA has raised questions about the agency’s capacity to manage such a massive portfolio. The SBA, traditionally focused on supporting small businesses through loans and disaster relief, now faces the daunting task of overseeing $1.6 trillion in student debt. Critics argue that this responsibility is far beyond the SBA’s core mission and expertise, potentially setting the stage for operational challenges.
Kelly Loeffler, the head of the SBA, has yet to outline a detailed plan for how the agency will manage the transition. Loeffler, a former U.S. Senator and co-owner of the Atlanta Dream, has faced scrutiny for her lack of experience in student loan management. Her leadership during this transition will be closely watched, particularly as the SBA grapples with a 43% workforce reduction.
The logistics of transferring 43 million borrower accounts to the SBA remain unclear. Questions persist about whether current Department of Education staff will be retained or transferred to the SBA. Advocacy groups fear that a disruption in staffing could lead to delays in loan processing, forgiveness approvals, and borrower assistance, exacerbating the already strained system.
Borrowers are bracing for potential impacts on their loan repayment plans. The SBA has not yet addressed how it will handle income-driven repayment plans, Public Service Loan Forgiveness, or other specialized programs currently managed by the Department of Education. Advocates warn that any disruption could harm vulnerable borrowers, including low-income individuals and public sector workers.
Political motivations behind the move are under scrutiny. Trump’s decision to dismantle the Department of Education and redistribute its functions aligns with his long-standing rhetoric about reducing federal bureaucracy. However, critics argue that this move is part of a broader effort to weaken public education systems and shift responsibility to agencies ill-equipped to handle such responsibilities.
Congressional Democrats have vowed to challenge the legality of the transfer. House Education Committee Chair, Rep. Robert Scott, has announced plans to hold hearings to examine the legality and feasibility of the SBA takeover. Meanwhile, Senate Republicans have largely remained silent on the issue, leaving questions about whether there is bipartisan support for the move.
As the nation waits for clarity on the future of federal student loans, one thing is clear: the SBA’s ability to manage this unprecedented responsibility will be a defining issue in the coming months. Whether this move will lead to improved efficiency or widespread chaos remains to be seen.
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Conclusion
The transfer of federal student loans to the SBA under President Trump’s administration has sparked significant controversy and concern. With the SBA simultaneously reducing its workforce by 43%, questions remain about the agency’s ability to manage the $1.6 trillion student loan portfolio effectively. Critics highlight potential legal challenges, operational disruptions, and the impact on millions of borrowers who rely on these programs. As the situation unfolds, the focus will be on whether this move leads to stability or chaos in the nation’s education system.
Frequently Asked Questions
1. Is the SBA legally allowed to manage federal student loans?
The Higher Education Act of 1965 designates the Department of Education as the administrator of federal student aid, raising legal questions about the SBA’s role in managing student loans.
2. How will the SBA handle the $1.6 trillion student loan portfolio with a reduced workforce?
The SBA faces significant challenges as it cuts 43% of its staff while taking on the massive responsibility of managing federal student loans, prompting concerns about its capacity to handle the transition smoothly.
3. What happens to current Department of Education employees?
Details about the fate of Department of Education employees remain unclear, with uncertainty over whether they will be transferred to the SBA or displaced during the transition.
4. Will borrower repayment plans be affected?
The SBA has not yet provided specifics on how it will manage income-driven repayment plans, Public Service Loan Forgiveness, or other programs, leaving borrowers uncertain about potential disruptions.
5. How can borrowers stay informed about changes to their loans?
Borrowers are advised to monitor official SBA and Department of Education communications, as well as updates from advocacy groups, to stay informed about the transition and its impact on their loans.