The U.S. Department of Treasury will begin collecting on defaulted federal student loan loans in what is intended as the first step move federal student loans out of the Department of Education.
On March 19, the U.S. Department of Education (ED) and the U.S. Department of the Treasury (Treasury) announced the interagency agreement. Under the agreement, Treasury will assume operational responsibility for collecting on defaulted Federal student loan debt and provide operational support to ED’s efforts to return borrowers to repayment. In subsequent phases, Treasury will work to provide operational support over non-defaulted Federal student loan debt, to the extent practicable and permitted by law, while also seeking opportunities to provide operational support to FSA’s other functions.
Currently, the student loan portfolio stands at nearly $1.7 trillion with fewer than 40 percent of borrowers in repayment and almost 25 percent of borrowers in default.
“By leveraging Treasury’s world-renowned expertise in finance and economic policy, we are confident that American students, borrowers, and taxpayers will finally have functioning programs after decades of mismanagement,” U.S. Secretary of Education Linda McMahon said in a press release issued by the Department.
“Treasury has the unique experience, the operational capability, and the financial expertise to bring long overdue financial discipline to the program and be better stewards of taxpayer dollars,” U.S. Secretary of the Treasury Scott Bessent said in the press release.
According to information in the press release, ED, in conjunction with Treasury, will communicate directly with stakeholders, including students, parents, borrowers, institutions, and vendors, to outline anticipated plans and timelines and address any questions.
This agreement follows nine agency partnerships signed over the past year, including the workforce development partnership with the U.S. Department of Labor, which has created an integrated Federal education and workforce system and reduced the need for States to consult multiple agencies to effectively manage their programs.
More information has been posted in a Federal Student Assistance Partnership fact sheet.
