Sweeping changes are coming to federal student loans this summer, impacting everything from how much you can borrow to how you’ll repay it. In many cases, borrowers now have enough details to at least roughly estimate how the new rules may affect their finances and their education.
But one transition still has borrowers and experts guessing as to how it will unfold and what impact it may have.
The Trump administration is in the initial stages of transferring millions of student loans from the Education Department to the Treasury Department. The phased transfer will ultimately result in the full handoff of the nearly $1.7 trillion federal student loan portfolio to a new agency.
If the shift goes smoothly, it’s possible that many borrowers will hardly notice. The switch doesn’t materially affect what loans borrowers receive or their monthly payments.
But experts expect the move could have a major impact on some borrowers, particularly those who are in default or struggling to make payments. It could also have a downstream effect on others. Some question whether a diminished Education Department can successfully juggle yet another major task alongside the launch of new repayment plans and the pending transition of millions of people out of the SAVE repayment plan.
“Anytime you see a big operational shift within federal student aid, that has the potential to have a significant impact on borrowers,” says Kyra Taylor, a staff attorney at the National Consumer Law Center who focuses on student loans.
[Read: Best Private Student Loans.]
Why Trump Is Shifting Student Loans to Treasury
By moving the student loan portfolio to Treasury, the Trump administration aims to accomplish two of its top goals.
First, the administration wants to get more borrowers paying off their loans, with an eye toward shaving off some of the overall outstanding loan balance. Second, the move relieves the Education Department of one of its key duties, further weakening an agency the administration has said it wants to dismantle.
Of the roughly 43 million Americans who have student loan debt, about 9 million are in default.
“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,” said Treasury Secretary Scott Bessent in a statement when the shift was announced in March.
Sen. Elizabeth Warren, D-Mass., blasted the plan, saying officials at both departments have failed to provide details about the timing, costs and purpose of the move.
“The Trump administration has no explanation for how this latest attempt to dismantle the Education Department is helping anyone — because it isn’t,” said Warren in a May 4 statement after releasing letters she received from both departments in response to her request for additional details.
The transfer will occur in phases, although the administration hasn’t laid out a specific timeline for when each phase will take place. Treasury will first take over management and collections of defaulted student loan accounts before eventually assuming control of all accounts. The administration has also said Treasury will provide “operational support” for other student aid functions, although it isn’t clear what that might entail.
The departments have already begun the early stages of the first phase of the transfer, wrote Mason Champion, Treasury assistant secretary, in a response letter to Warren.
At least seven Department of Education employees will be assigned to the Treasury Department to help implement the transfer, Champion said.
[Read: Best Student Loan Refinance Lenders.]
How the Shift Could Affect You
Questions and uncertainty remain, but here are a few possibilities borrowers should watch for.
More Aggressive Collections
The federal government has several tools it can use to collect defaulted student loan debts, although the sharper instruments — garnishing wages and seizing tax refunds — have remained shelved for about six years, since they were paused as a pandemic-relief measure.
The Trump administration has suggested it wants to restart both and even announced that it was sending warning notices to defaulted borrowers in January before pulling back on that plan, saying it would instead delay the move to give people more time to evaluate their new repayment options.
But experts say they expect the Treasury Department to once again use those collections methods.
When a borrower defaults on a student loan, the government has the authority to seize up to 15% of their after-tax wages. This wage garnishment can continue until the debt is paid in full or the default is resolved. Borrowers must be notified 30 days before garnishment starts, and this notice includes options for resolving the default status and instructions for requesting a hearing to dispute the action.
A borrower will also receive a notice if the government plans to withhold their tax refund — known as Treasury offset — to collect on debt. After the notice, the borrower will have 65 days to either pay off the debt or take one of several steps, such as entering into rehabilitation or working out a new repayment agreement.
[Read: Best Student Loans for Graduate School]
Confusion for Borrowers
Many student loan borrowers are already heading into the summer of 2026 trying to make sense of a dizzying number of changes to the federal program.
“Adding one more element of change just adds in more chaos and confusion and complexity for borrowers,” says Taylor.
But observers worry that those borrowers might end up dealing with a new agency that isn’t as well-versed in the options available to student loan borrowers and the rights those borrowers have.
“Student loans are very different than any other kind of debt that the Treasury Department could collect on behalf of the federal government,” says Aissa Canchola Bañez, policy director at the advocacy group Protect Borrowers. “There are a lot of benefits and protections that a student loan borrower has that other folks who might have other debts do not have.”
She says those protections include debt forgiveness options and loan rehabilitation. Students are also protected if they were defrauded by their school or had a disability impact their earnings.
“At the end of the day, the Treasury is the federal government’s debt collector, and they care about collecting debt regardless of whether or not somebody might be eligible for other types of protections or cancellation,” says Canchola Bañez.
Potential Delays and Errors
The Education Department and its loan servicers are juggling multiple major changes at the same time.
For example, after a court ruling put an end to the Biden-era SAVE repayment plan, 7 million borrowers will now need to move to new plans within a 90-day window this summer. Loans in that plan have been in forbearance as the court case progressed, and many of those borrowers haven’t made a payment in years.
The new Repayment Assistance Plan, the Trump administration’s income-driven repayment plan, is scheduled to launch on July 1, the same day that various additional changes to student loans also go into effect.
Adding the transfer of nearly 43 million student loan accounts could lead to delays or errors that could impact some borrowers, experts say.
These changes will need to be ushered in by a shrinking Education Department, which saw its staff cut nearly in half in 2025. The Federal Student Aid office was reduced from 1,433 employees to 777.
“Even with the simplest transfers of loan accounts between two servicers, we’ve found hiccups and errors that occur,” says Canchola Bañez. “It’s a massive portfolio, and there are millions of borrowers that are part of this.”
More from U.S. News
Will You Be Disqualified From Public Service Loan Forgiveness Thanks to ‘Illegal’ Activities?
Undergrad Loan Limits Haven’t Risen Since 2008. Why Not?
This Type of Borrower Gets the Lowest Rate on a Private Student Loan
As Trump Moves Student Loans to Treasury, What Does This Mean for You? originally appeared on usnews.com
