Heritage Explains What is the Trump Admin Changing About Student Loans? | Jonathan Butcher
Mar 25, 2026
Jonathan Butcher, acting director of the Center for Education Policy and a senior research fellow at the Heritage Foundation, discusses the federal shift of student loan management to the Treasury. He explains the phased transition, implications for federal versus local control, debates over equity and funding, and next steps for Congress and state-level education reforms.
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Treasury Takes Over Federal Student Loans
- The federal student loan program will move from the Department of Education to the Department of the Treasury in three phases.
- Treasury will first handle default collections, then loan origination/servicing, and finally FAFSA and the rest of the application infrastructure.
Operational Move Also Advances Department Closure
- Moving servicing to Treasury is framed as both operationally logical and politically strategic to shrink the Education Department.
- Butcher cites Treasury's existing role and says the shift advances long-term goals of closing ED per the prior executive order.
High Default Rates Create Taxpayer Risk
- The transcript highlights severe repayment problems: many loans default and about 40% of borrowers are not repaying.
- Butcher warns taxpayers eventually shoulder unpaid balances and expects Treasury to start collection work by year-end.