If Trump Eliminates the Department of Education, Do You Still Have To Pay Your Student Loans?

President-Elect has pledged to close down the U.S. Department of Education and redirect most of its responsibilities to the states in his second term. Founded in 1980, the federal agency oversees and coordinates national educational policies, programs and initiatives, including federal financial aid.

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So, if Trump eliminates the Department of Education, do you still have to pay your student loans?

The U.S. Department of Education administers federal student aid programs such as Pell Grants, direct loans and work-study programs. These initiatives help students afford to attend college and participate in other post-secondary education.

In addition, the agency distributes federal funding to states, school districts and educational organizations to support public schools, higher education and career training. The Education Department also works with state and local governments to implement federal educational laws and initiatives.

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Despite President-Elect Trump’s campaign promises, it would be nearly impossible for him to eliminate the Education Department, as such a move requires Congressional approval. While Republicans will control the White House and Congress next year, the GOP has a slim five-seat lead (220 to 215) in the U.S. House.

“With a razor-slim House majority and a non-filibuster-proof lead in the Senate, it is highly unlikely that a full-scale elimination of the Department of Education (DOE) could be achieved,” said Bill Townsend, founder and CEO of College Rover. The company provides an online search tool that teaches students and parents more about U.S. colleges and universities.

Townsend said shuttering the DOE would “lead to chaos” because the federal agency administers nearly $2 trillion in student loans.

“There is no mechanism to easily and quickly transfer the $1.7 loan portfolio to another agency, whether that be Treasury, Labor or Justice,” Townsend elaborated. “Compliance, repayment and protection for student loan recipients need to be carefully mapped out. That will not be an easy or quick task.”

In an interview with the National Association of Student Financial Aid Administrators (NASFAA), Jon Fansmith, senior vice president at the American Council on Education (ACE), said that getting rid of the DOE doesn’t mean the federal government will no longer fulfill its responsibilities.

“The law requires you to run financial aid programs,” Fansmith told NASFAA. “The law requires you to collect student loans. The law requires you to enforce civil rights at schools and campuses.”

Nevertheless, Townsend said the incoming Presidential administration will likely end the “Saving on a Valuable Education” (SAVE) plan. Launched by the Biden Administration last year, the SAVE plan is an income-drive repayment (IDR) plan that calculates monthly student loan payments based on income and family size. The calculation often resulted in lower monthly payment plans compared to others.

“There is a concerted effort by many conservatives to change the appeal and direction of college education,” Townsend said. “Killing the SAVE plan will be part of that.”

While President-elect Trump hasn’t directly said he would allow private lenders to offer student loans — which typically come with higher interest rates than federal loans — his personnel choices and policy directions indicate a possible shift towards privatizing student loans, according to Politico.

In addition, it is unknown whether the states have the capacity to take over federal student loan responsibilities. The complexity and scale of the $1.7 trillion student loan portfolio could be challenging for individual states to manage effectively.

So, if Trump manages to eliminate the Department of Education, do you still have to pay your student loans? The short answer is “yes,” but you will likely pay the loans to a different federal agency.

In the meantime, Townsend recommended current and future student loan borrowers spend loan money only on the essentials, consider less expensive higher education options, and borrow as little money as possible.

“Realistically look at career choices and potential salaries to make sure you can afford the education you have chosen,” Townsend said. “Read every contract for a loan, and if you do not understand the terms, get advice from a family member, family friend, high school counselor or religious leader about what to do.”

_{Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.}

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