Trump plans to transfer federal student loan management to the Small Business Administration, raising legal and logistical concerns. Experts warn the SBA may not be equipped to handle the $1.6 trillion program.
President Donald Trump announced Friday a major shake-up in federal student loan management, revealing that oversight of the program will be transferred from the Department of Education to the Small Business Administration (SBA). The surprise move is part of Trump’s broader initiative to downsize — and potentially dismantle — the Department of Education.
“We have a portfolio that is very large. Lots of loans. Tens of thousands of loans. Pretty complicated deal. And that’s coming out of the Department of Education immediately,” Trump said. In reality, over 43 million Americans currently carry student loan debt — far more than the figure he referenced.
The President offered few details on how the SBA would manage the massive loan program, nor what borrowers can expect in the near term. “They’re all set for it. They’re waiting for it,” Trump said of the SBA. “It will be serviced much better than it has in the past. It’s been a mess.”
Neither the White House nor the Commerce Department responded to media requests for clarification. Education Secretary Linda McMahon appeared on Fox News later that day, noting that she would work with the SBA on a strategic transition plan.
Policy experts expressed concern about the legality and feasibility of the move. “This has mostly been discussed in terms of Treasury,” said Frederick Hess of the American Enterprise Institute. “Until they make that case, I think it’s fair to ask hard questions about why the SBA and how this will work.”
The SBA, currently led by former Georgia Senator Kelly Loeffler, has experience managing small business loan programs but nothing on the scale of federal student lending. During the pandemic, the SBA faced significant criticism over its handling of the Paycheck Protection Program, which was plagued by disorganization and fraud.
Ironically, just hours after the announcement, the SBA revealed plans to cut its own workforce by 43%, raising additional questions about its capacity to manage one of the government’s largest loan portfolios.
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