What could happen to student loans as Trump signs executive order to dismantle Department of Education

Donald Trump has signed an executive order to eradicate the Department of Education amid a plan to 'shut it down as quickly as possible' - so what does that mean for student loans?

With millions of Americans receiving help from student loans every year, the Department of Education is owed a hefty chunk of money - a figure that has only grown in the last few years.

According to Education Department data analyzed by higher education expert Mark Kantrowitz, and cited by CNBC, outstanding debt increased from around $1.59 trillion at the start of 2021 to roughly $1.64 trillion toward the end of 2024.

Once Trump returned to the Oval Office in January this year, he accused the overall department of 'breath-taking failures', and on Thursday (March 20), he officially signed the order to shut it down.

What does Trump's order do?

The POTUS has claimed that the 'experiment of controlling American education' through Federal means has 'plainly failed', so closing the Department of Education intends to 'provide children and their families the opportunity to escape a system that is failing them'.

The order continues: "The Department of Education is not a bank, and it must return bank functions to an entity equipped to serve America’s students. Ultimately, the Department of Education’s main functions can, and should, be returned to the States."

Though Trump has made the order to scale down the department, Congress would need to take action to dissolve it completely.

Donald Trump has accused the Department of Education of 'failing' the public (Chip Somodevilla/Getty Images)

What does the order mean for student loans?

While a lot of people might hope otherwise, the dissolution of the Department of Education does not mean loans will just disappear.

A number of potential situations surrounding loans have been floated in the wake of Trump's order, with Karoline Leavitt, the White House press secretary, among those sharing their expectations.

Loans will remain under a minimized version of the department

While speaking with reporters about Trump's order, Leavitt said that the Department of Education may continue to exist as a minimized version, and that this department would continue to oversee federal student loans.

Loans will be taken on by another department

Trump has previously expressed belief that the Department of Education should not be responsible for the loans at all, suggesting instead they should fall to a different section of the government.

He said: “I don’t think the Education [Department] should be handling the loans. That’s not their business.”

The president suggested the Treasury Department, Commerce Department, or the Small Business Administration could become the new managers of student loans.

Congress would have to agree to fully dismantle the Department of Education (JOSEPH PREZIOSO/AFP via Getty Images)

Delays to loan forgiveness

With Trump's order having come off the back of a push for loan forgiveness encouraged by the Biden administration, many former students may have applications for loan forgiveness programs interrupted.

Kantrowitz noted that there are services which typically handle the paperwork relating to loan relief, but the Department of Education has 'final approval of all student loan forgiveness', meaning any ongoing applications may face delays.