In recent headlines, one bold move has shaken the foundation of America’s educational framework: the proposed closure of the U.S. Department of Education. While this development may sound like the end of federal involvement in student affairs, there’s one shocking truth that borrowers need to understand clearly: your student loan debt is not going anywhere. Even if the department shutters its doors, your repayment obligations remain firmly in place.
President Donald Trump’s executive order, issued in March 2025, directs the dismantling of the Department of Education, sparking questions about what this means for federal student loan borrowers. This article will break down what’s happening, why it matters, and exactly what you should do if you have student debt.
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What Happens If the Department of Education Closes?
Let’s clarify something right away: Even if the Department of Education is eliminated, federal student loans do not magically disappear. These loans are legal contracts between borrowers and the U.S. government. The Department of Education is currently the administrator, but it is not the “lender” in the traditional sense.
If the department is shut down, its responsibilities, including federal student aid programs, will likely be transferred to another government agency, such as the U.S. Department of the Treasury. The federal government will still own and manage the loans.
Real Example:
Imagine your bank changes names or merges with another. Your mortgage doesn’t vanish. You still owe the money; only the name on the letterhead changes.
Why the Executive Order Doesn’t Erase Debt
The U.S. legal system protects the government’s interest in enforcing contracts. Student loans, particularly federal ones, are among the most secure obligations the government holds. They are:
- Backed by law
- Reported to credit bureaus
- Ineligible for discharge in most bankruptcies
- Collected through tax offsets and wage garnishments if unpaid
Even a major restructuring of the department cannot override these legalities.
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According to the Federal Reserve, about 43 million Americans hold federal student loans. That’s nearly 1 in 8 people in the U.S.
What Will Happen to Student Loan Servicing?
Servicers like Nelnet, MOHELA, and Aidvantage work under contracts with the Department of Education to manage billing, repayment plans, and customer service. In the event of a closure:
- Servicing contracts may be reassigned to other agencies or new providers.
- You may receive updated communication, notifying you of new contacts or systems.
- Repayment programs (like Income-Driven Repayment or Public Service Loan Forgiveness) will likely continue under federal management, unless changed by new legislation.
What Borrowers Should Do Now
1. Continue Making Payments
Do not stop your scheduled payments unless your loan is in a deferment, forbearance, or grace period. Missing payments could damage your credit or result in default.
2. Check Loan Status Online
Log in to studentaid.gov to confirm:
- Your current servicer
- Payment plan
- Loan balance
- Upcoming due dates
3. Watch for Official Communications
You will be notified if there is any change in loan servicing or repayment processes. Avoid scams claiming your loans are “forgiven” due to the department’s closure.
4. Explore Consolidation or Refinancing
This might be a good time to evaluate if consolidating your federal loans or refinancing with a private lender makes sense for you, especially if interest rates shift.
5. Know Your Rights as a Borrower
Stay informed about borrower protections, such as forbearance options, deferments, and complaint resolution. The Consumer Financial Protection Bureau offers helpful resources.
6. Consider the Political Climate
Congress holds the key to many of the big changes in student loan policy. Stay engaged with legislative developments that could influence repayment rules or forgiveness programs.
FAQs
Q1. Will my loans be forgiven if the Department of Education closes?
A: No. Your student loans remain enforceable debts regardless of administrative changes.
Q2. Will repayment programs like IDR or PSLF go away?
A: Not immediately. These are governed by federal law. Congress would have to pass new laws to end or change them.
Q3. Will I still be able to apply for federal student aid?
A: Yes, through studentaid.gov or whatever agency takes over. The system may be restructured but will continue to offer loans and grants.
Q4. Could this impact private student loans?
A: No. Private loans are managed by banks or credit unions and are not affected by changes to the Department of Education.
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