Trump Hands Collection Of Defaulted Student Loans To The Treasury, Resolving Long-Standing Concern That Nine Million Borrowers Could Still See Their Tax Refunds

The Filing

WASHINGTON. The Department of Education announced Thursday that it has transferred responsibility for collecting on the nation's defaulted federal student loans to the Department of the Treasury, resolving a long-standing concern within the administration that the roughly nine million Americans in default were being pursued by an agency with no particular gift for taking people's money.

Under the interagency agreement, Treasury's Bureau of the Fiscal Service will assume operational control of the Default Resolution Group and the systems that track delinquent borrowers, the first phase of a multistep process that officials say will end with Treasury absorbing the entire federal student loan portfolio. To complete the handoff, Treasury moved to revoke a 25-year-old exemption that had allowed Education's Federal Student Aid office to service its own defaulted debt, an arrangement the administration described as a redundancy now that a more capable collector stood ready.

The administration framed the transfer as an act of mercy. Treasury said it would "assume operational responsibility for collecting" on the loans while "supporting efforts to bring borrowers back into repayment," a phrase officials delivered with the warmth of a department that also operates the Treasury Offset Program, the mechanism through which the federal government intercepts tax refunds, wages, and Social Security checks to satisfy debts. "We are simply consolidating the work in the hands of the people who do it best," said one source within the administration, declining to specify which payments would be intercepted first.

For borrowers, the practical change is that the entity now empowered to garnish their refunds and benefits is the same entity that issues those refunds and benefits, a streamlining the administration characterized as common sense. Consumer advocates noted that the move also advances the president's stated goal of dismantling the Department of Education, which can be wound down considerably faster once its largest remaining function has been packed into a box and carried across the National Mall.

Department officials stressed that no borrower would lose access to repayment options, only to the office that had administered them, and that the nine million people in default would continue to enjoy every protection compatible with being processed by the most efficient collection apparatus the United States government maintains.

At press time, Treasury had confirmed that borrowers with questions about their accounts should direct them to the Department of Education, which no longer handles the accounts.

Who Benefits

§Donald J. Trump, who advances his pledge to abolish the Department of Education without an act of Congress and gets to recast mass debt collection as an act of compassion.
§Education Secretary Linda McMahon, handed a faster path to wind down the agency she was confirmed to lead by shipping off its single largest remaining function.
§The Treasury Department and its Bureau of the Fiscal Service, which acquire a nine-million-borrower collections operation along with the Treasury Offset Program's power to seize tax refunds, wages, and Social Security checks.
§Private debt collection agencies, rehired under new Treasury contracts to pursue defaulted borrowers back into repayment.
§The administration's department-dismantling agenda and its architects, who achieve by interagency memo what would otherwise require legislation.
§Future presidents, who inherit the precedent that a statutory cabinet department's core duties can be relocated to whichever agency is best at extracting money from the public.

Sourced to the public record · presented without editorial embellishment