The Trump administration’s decision to shift the federal student loan program under the Small Business Administration (SBA) has raised concerns that borrowers may be at a higher risk of defaulting on their loans. Experts argue that the move may not result in the expected cost savings for the government either.
The change comes after President Trump expressed his intention to dismantle the education department and integrate student loans within the SBA. Yet, critics are apprehensive, noting that the SBA lacks experience with such loans and might be set to lose nearly half of its staff.
The recent upheaval in the student loan program follows changes to and reversals of borrower repayment plans, including the controversial Save Plan, and coincides with rising living costs across the United States. This combination of factors is expected to increase the number of borrowers struggling with their payments. There are currently over 42 million federal student borrowers in the US, owing a collective nearly $1.7 trillion in debt, with about 30% having been past due on payments last year, according to the Government Accountability Office.
Jessica Thompson, senior vice-president of the Institute for College Access & Success, as well as Michael Negron, who previously worked on student debt for the National Economic Council during the Biden administration, have expressed their concerns regarding the lack of infrastructure and expertise necessary to handle such a complex operation. Their apprehensions are compounded by the recent federal job cuts and uncertainty over who will ultimately control student loans.
Some Republican lawmakers had anticipated that Trump would transfer the loan operation to the treasury department instead, considering it to be better equipped to manage the system. However, despite this speculation, Trump announced on March 21st that the SBA would immediately take control of managing student loans.
Source: https://www.theguardian.com/us-news/2025/apr/06/student-loans-trump-small-business-association
