Education Dept. Transfers Defaulted Loan Collection to Treasury

The U.S. Department of Education announced on Thursday an interagency agreement with the Treasury Department to transfer responsibility for collecting on defaulted federal student loans, marking the initial phase of a broader shift aimed at moving the entire $1.7 trillion portfolio to Treasury oversight. The move, part of the Trump administration's efforts to reduce the federal role in education, affects about $180 billion in defaulted loans, representing roughly 11 percent of the total portfolio managed by the department's Federal Student Aid office.

Under the agreement, dubbed the Federal Student Assistance Partnership, Treasury will assume operational duties for debt collection on loans where borrowers are more than 270 days behind on payments. This first phase also includes Treasury providing support to help nondefaulted borrowers return to repayment. Future phases, with no specified timelines, call for Treasury to offer operational assistance for nondefaulted loans where feasible under the law, along with support for other Federal Student Aid functions. Officials emphasized that borrowers face no immediate changes and should continue working with their existing loan servicers.