Millions of student loan borrowers left in limbo as Trump shuts down federal aid office

Washington, D.C. – President Donald Trump took a significant step toward dismantling the U.S. Department of Education on Friday, announcing that the federal student loan portfolio and special education programs would be transferred to other federal agencies, effective immediately.

Speaking from the Oval Office alongside Defense Secretary Pete Hegseth, Trump revealed that the Small Business Administration (SBA) would assume control over the nation’s $1.6 trillion student loan portfolio. “I’ve decided that the SBA, the Small Business Administration, headed by Kelly Loeffler, a terrific person, will handle all of the student loan portfolio,” Trump stated. The move follows weeks of turmoil within the Department of Education’s Office of Federal Student Aid (FSA), which has been severely weakened by staff reductions and buyouts.

Despite the sweeping announcement, it remains unclear how the transition will be implemented or if any remaining FSA employees and their expertise will be transferred to the SBA. “We have a portfolio that’s very large,” Trump said, emphasizing that the student loan system would now be “serviced much better than it has in the past.” In a follow-up tweet, Loeffler echoed the president’s sentiments, stating that the SBA is “ready to take the lead on restoring accountability and integrity to America’s student loan portfolio.”

Multiple sources within FSA, speaking on condition of anonymity for fear of retribution, said they were caught off guard by the decision. The Education Department, White House, and SBA have not provided further clarification on how the transition will be managed.

Further signaling the administration’s intent to unravel the Education Department, Trump also announced that oversight of the Individuals with Disabilities Education Act (IDEA) would be transferred to the Department of Health and Human Services (HHS). “Bobby Kennedy, the Health and Human Services [Secretary], will be handling special needs,” Trump said, apparently referring to Robert F. Kennedy Jr., who currently leads HHS.

IDEA is a critical federal law ensuring that students with disabilities receive a free and appropriate education. In 2024, it allocated approximately $15 billion in funding to schools for special education services. The Education Department’s Office of Special Education Programs has historically overseen its administration, raising concerns about how HHS will handle the transition. HHS has not responded to requests for comment.

The abrupt policy shift directly contradicts assurances given by White House press secretary Karoline Leavitt just a day earlier. On Thursday, Leavitt told reporters that student loans and Pell Grants would “still be run out of the Department of Education.” She also indicated that IDEA funding would remain under the department’s purview, stating that “any critical functions of the department” would be preserved.

It remains uncertain whether these transfers can be enacted without congressional approval, as both federal student loans and IDEA funding have traditionally fallen under the jurisdiction of the Department of Education. The move comes just a day after Trump signed an executive order directing U.S. Secretary of Education Linda McMahon to “take all necessary steps to facilitate the closure of the Department of Education.”

The administration’s latest actions have raised alarms among education advocates and lawmakers, who question whether dismantling the Department of Education can be achieved unilaterally. With no clear transition plan in place, millions of student loan borrowers and families of children with disabilities face uncertainty about the future of these essential programs.