RALEIGH — In continued downsizing moves, the U.S. Department of Education and the U.S. Department of the Treasury announced a major new partnership related to the management of the nation’s $1.7 trillion federal student loan portfolio.
Under the Federal Student Assistance Partnership, Treasury will manage collections on defaulted loans and help get borrowers back into repayment. Future phases could expand Treasury’s role to nondefaulted loans and other federal student aid functions, according to the Department of Education’s press release.
“This partnership marks an intentional and historic step toward breaking up the Federal education bureaucracy and dramatically improving the administration of Federal student aid programs that millions of American students, families, and borrowers rely on to access higher education,” said U.S. Secretary of Education Linda McMahon.
“As the Federal student aid portfolio soars to nearly $1.7 trillion and with nearly a quarter of student loan borrowers in default, Americans know that the Department of Education has failed to effectively manage and deliver these critical programs,” McMahon said. “By leveraging Treasury’s world-renowned expertise in finance and economic policy, we are confident that American students, borrowers, and taxpayers will finally have functioning programs after decades of mismanagement.”
The move comes as fewer than 40% of the 42.3 million borrowers are currently repaying their loans and nearly 25% are in default, according to McMahon’s release. The move aligns with President Donald Trump’s March 2025 executive order directing the eventual dissolution of the Education Department.
“Under President Trump’s leadership we are undertaking the first serious effort to clean up a $1.7 trillion portfolio that has been badly mismanaged for years,” said Treasury Secretary Scott Bessent. “Treasury has the unique experience, the operational capability, and the financial expertise to bring long overdue financial discipline to the program and be better stewards of taxpayer dollars.”
Both agencies say they will keep students, parents, schools and vendors updated as the changes roll out.
The agreement is the latest in a series of interagency partnerships the Education Department has used to shrink its footprint. As previously reported, the department has already shifted foreign gift-tracking duties to the State Department.
Other previously announced partnerships have moved family support and school safety programs to the Department of Health and Human Services (HHS), most K-12 and postsecondary grant administration to the Department of Labor, Indian education programs to the Department of the Interior, medical school accreditation reviews to HHS and international education grants to the State Department.
The U.S. Department of Education also announced it will be vacating its current office location in the Lyndon B. Johnson headquarters building and will relocate to 500 D Street SW.
The department said the move, set for August, will save taxpayers “approximately $4.8 million annually in operating costs and eliminating wasted space in a building that is roughly 70% vacant.”
“One year ago, President Trump signed one of the most consequential executive orders of his presidency — to break up the federal education bureaucracy and return education to the states,” said McMahon. “Thanks to the hard work of so many, we have made unprecedented progress in reducing the federal education footprint, and now we are pleased to give this building to an agency that will benefit far more from its space than the Department of Education.
“This is an important step in our efforts to forge brighter futures for our nation’s students, honor the taxpayers who invest in their promise, and support the civil servants who keep this vital work moving forward.”
