The Trump administration transferred operational responsibility for collecting on defaulted federal student loans to the Treasury Department, marking a significant step in its ongoing efforts to dismantle the U.S. Department of Education.

This move involves more than 7 million borrowers whose loans entered default after 270 days without payment, part of the Education Department's nearly $1.7 trillion federal student loan portfolio. Treasury Secretary Scott Bessent stated that his department's financial expertise would bring "long overdue financial discipline" to the program. Education Secretary Linda McMahon added that leveraging Treasury's capabilities ensures "functioning programs after decades of mismanagement."

The transfer is the latest in a series of actions stemming from President Trump's executive order signed exactly one year ago on March 20, 2025. That order directed McMahon to "take all necessary steps to facilitate the closure of the Department of Education and return authority over education to the States and local communities" while maintaining essential services. The Department of Education, established in 1980, has long been a target for conservatives seeking to reduce federal involvement in education.

Since the order, the administration has reduced the agency's workforce by nearly half through layoffs and reassignments. Functions have shifted to other agencies, including school safety grants and higher education management to the Department of Labor. In February, additional programs were moved out, continuing the wind-down.

As of earlier this month, a year after initial mass layoffs, the Education Department continued handing off programs to other agencies for the fiscal 2026 budget. Observers noted that the department has been "mostly dismantled," with bold measures yielding changes, though full elimination requires congressional action.

Consumer advocates expressed concerns over the student loan shift. Kyra Taylor of the National Consumer Law Center warned it could create "a new set of obstacles and uncertainty" for borrowers without clear plans for communication or training Treasury staff on borrower rights.

The administration maintains that critical functions like Pell grants and civil rights enforcement will continue uninterrupted, with the goal of empowering states and local communities. McMahon emphasized working through Congress for an orderly transition.

These steps align with Trump's campaign pledge and longstanding Republican efforts to devolve education control from Washington.