This is a solvable problem that does not require keeping the DOE alive.
As President Donald Trump prepares to order the dismantling of the Department of Education, the financial arm of the agency – which makes loans directly to borrowers and manages trillions of dollars in student debt – faces an uncertain future, with steep staff cuts and lack of communication exacerbating the uncertainty, according to interviews with more than a dozen current and former department employees.
The $1.64 trillion financial portfolio is managed separately from the department’s policy apparatus, the latter of which Trump has sought to wind down or reassign to other agencies. But Trump acknowledged Thursday that the massive loan balance was a complicating factor in his effort to shutter the agency.
“We’ve actually had that discussion today,” Trump told reporters in the Oval Office, suggesting that the debt could land at Treasury, Commerce, or the Small Business Administration. He said SBA Administrator Kelly Loeffler “would really like to do it.”
And then there is the question of whether the government will stay in the business of lending money to students directly.
Project 2025 – the Heritage Foundation effort that was authored by many Trump allies, though Trump tried to distance himself from it during last year’s campaign – suggested a new agency should be established to extend loans going forward, run by a Senate-confirmed leader and board of trustees. But the government would get out of the business of making the loans directly, instead reverting back to a role as guarantor of loans underwritten by other companies. The new agency would be funded by Congress, with a goal of “treating taxpayers like investors,” with loans that could have better terms for certain academic disciplines or professions.
The policy remedy of Project 2025 is the right direction but doesn’t go far enough. The federal government should also get out of the business of guaranteeing loans. The federal government is in no position to judge the credit worthiness of debtors and funding higher education is not within the scope of responsibility of the federal government. If some states want to pick up this funding, that’s up to them.
End federal loans. Auction off existing debt to banks. Close the Department of Education.
Done.
Gov should get out of the student loan business. let the educational institutions finance their loans with their substantial endowment money. If their students are successful they will prosper.