Trump’s plan to transfer millions of student-loan accounts to the Treasury is in the works, officials confirm
Trump’s plan to transfer millions of student-loan accounts to the Treasury is in the works, officials confirm
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The Treasury has started the process of taking over defaulted student-loan borrowers’ accounts.
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It said Education Department employees will be sent to the Treasury to help with the transition.
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The agency did not provide a timeline for when it will officially assume management over the accounts.
The Trump administration is beginning a complicated process of transferring millions of student-loan borrowers to a new agency.
The Treasury Department confirmed in an April letter to Sen. Elizabeth Warren — released on Monday — that it has started preparations to take over the Department of Education’s 9 million defaulted student-loan accounts.
The confirmation follows a March announcement that the transfer of student-loan accounts to the Treasury would occur in phases, beginning with defaulted accounts, with the goal of eventually transferring the rest of the federal portfolio to the agency.
Mason Champion, the Treasury’s assistant secretary, wrote in the letter that the transfer has so far “achieved two significant milestones,” the first being a request for information from stakeholders on procuring agents to help defaulted borrowers with their options to return to good standing.
The second “milestone” was an agreement between the Treasury and Education Departments to send seven Education employees to Treasury, and two Treasury employees to Education, which Champion said will “support the implementation of the partnership, with an initial focus on the transition of operational responsibility for the defaulted portfolio to Treasury.”
The letter did not specify a timeline for each phase, including the timing of the official handover of management of the defaulted portfolio to the Treasury. Warren said in a statement that the agreement “is bad for students and families, and I’ll do everything I can to fight back,” adding that the department has not provided evidence showing that the transfer would improve borrower outcomes.
The Department of Education, in a letter to Warren, wrote alongside the Treasury’s letter that “Treasury is well positioned to provide operational support to ED’s ongoing work to enhance the management of the federal student assistance programs.”
Transferring the student-loan portfolio to the Treasury is part of the administration’s broader goal to dismantle the Department of Education. Former officials previously told Business Insider that handing over student loans to the Treasury could amplify confusion for both borrowers and servicers; Arne Duncan, the education secretary under former President Barack Obama, said that the move “makes no sense educationally or from a customer service standpoint.”
Additionally, the Department of Education paused involuntary collections on defaulted student loans in January, meaning borrowers have not faced wage garnishment or seizure of federal benefits. While the department has not said when the pause will lift, borrowers will likely need extra assistance preparing for repayment, and moving their accounts to a new agency could jeopardize those efforts.
“Having systems that are spread across multiple agencies really puts the entire system at risk and is going to make it a lot harder, not only to communicate with borrowers, but also to make sure that we are moving toward a more streamlined system,” Sarah Sattelmeyer, education project director at the left-leaning think tank New America, said.
Read the original article on Business Insider
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