Student Loan Borrowers Face High Risk if Trump Disbands Education Department, Groups Warn Warren

Education groups are voicing serious concerns about President Donald Trump’s intentions to dismantle the Department of Education, as this could lead to heightened student loan debt and reduced educational attendance.

Senator Elizabeth Warren shared a detailed report—revealed exclusively by Business Insider—that consolidates feedback she gathered from 11 national education organizations regarding the potential consequences of Trump's educational framework for students and borrowers.

A major point of concern for these organizations is the outcome for student-loan borrowers. The Supreme Court's recent decision allows for a workforce reduction at the Department of Education, potentially impacting the Federal Student Aid office, which controls around $120 billion each year in grants and loans.

According to the American Council on Education, any hold-up in student financial aid funding could prevent students from timely enrollment and course completion, thereby increasing their debt burden to finalize their education.

Due to possible delays in federal aid, students might resort to private loans. The NEA cautions that private lending often comes with more dangerous terms and can result in predatory lending practices, possibly becoming the sole option if federal aid is not swiftly available.

This report emerges amidst various changes affecting student-loan recipients and educational policies. As of April, the administration decided to reinitiate collections on defaulted loans after a five-year halt, and in July, Trump enacted a spending bill introducing radical shifts in the repayment framework.

Notably, this legislation imposes a $200,000 lifetime borrowing cap for graduate students pursuing professional degrees like medicine or law, despite average tuition costs surpassing this limit. Analysts suggest that students may turn to private lenders or might abandon their advanced degree plans.

The new law eliminates existing income-based repayment schemes, including the SAVE plan, replacing them with two alternatives: a standard repayment model and a Repayment Assistance Plan, which proposes repayments tied to income, with debt forgiveness after 30 years.

Groups have expressed that the fresh repayment structures might result in increased monthly payments and, compounded by decreased staffing at Federal Student Aid, this could exacerbate the difficulty of managing affordable payments.

The report also details Trump's proposal to move student loan administration from the Department of Education to a different federal entity. Although this change has not yet occurred, the Student Borrower Protection Center cautions Warren that realigning the student loan program during a period of significant borrower distress may amplify the disarray and instability borrowers are already dealing with, risking more borrowers being neglected.

Trump’s push for disassembling the Department of Education hasn't slowed. In a February move, the administration slashed over $900 million in research funds, a decision employees claim will hinder data collection and endanger allocations to underprivileged schools.

Education Secretary Linda McMahon has acknowledged that completely dissolving the Department of Education requires congressional consent. However, she supports significantly reducing its workforce, asserting that the recently approved cuts aim to enhance efficiency and accountability, ensuring resources are directed to those who need them most: students, parents, and educators.