Committee Ranking Members argue that the scheme “will set the stage for more dysfunction in a federal student aid system that the Trump Administration has already made more expensive and confusing to navigate”
Washington, D.C. – U.S. Senators Patty Murray (D-WA), Elizabeth Warren (D-MA), Bernie Sanders (I-VT), Ron Wyden (D-OR), and Tammy Baldwin (D-WI) pressed Secretary of Education Linda McMahon and Secretary of the Treasury Scott Bessent to rescind their plans to move the administration of federal student loans to the Treasury Department (Treasury), the latest move in the Trump administration’s attempts to dismantle the Department of Education (ED).
The lawmakers are the Ranking Members of the Senate Appropriations Committee; Senate Banking, Housing, and Urban Affairs Committee; Senate Health, Education, Labor, and Pensions Committee; Senate Finance Committee; and Senate Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies.
“This latest illegal scheme from the Trump Administration threatens to trap student loan borrowers, students, and families in chaos and bureaucracy, all while American taxpayers are left to foot the bill for Treasury to administer programs that ED can and should administer itself,” wrote the lawmakers.
Congress recently reaffirmed on a bicameral, bipartisan basis that ED has no authority to transfer its statutory responsibilities to other agencies, stating that doing so would “create inefficiencies, result in additional costs to the American taxpayer, and cause delays.”
Contrary to that directive, ED’s most recent interagency agreement (IAA) transfers its responsibilities of managing student loans and federal student aid to Treasury, without Congressional authorization. Previous IAAs transferred ED’s management of career and technical education programs, adult education grant programs, along with dozens of programs for early childhood, elementary, secondary, and postsecondary education out of ED.
“The Trump administration’s record of haphazard decision making and utter disregard for the actual issues facing students, families, and student loan borrowers suggests that this IAA will be implemented in a way that leaves borrowers with limited options and little to no guidance while increasing the number of borrowers in default and economic distress,” warned the lawmakers.
The senators argued that the first phase of the IAA is likely to worsen the student loan default crisis, because it tasks Treasury — an agency with no experience in student loan administration — with collecting on defaulted student loan debt and helping borrowers exit default. They cited the Treasury Department’s reductions in force as reason to doubt the success of the new arrangement, in addition to a pilot study where Treasury was made responsible for collections and loan rehabilitation for several thousand student loan borrowers but only successfully completed rehabilitations for eight.
Further, the senators argued that the second and third phases of the IAA — in which Treasury will be tasked with potentially managing the entire federal student loan portfolio and administering the FAFSA form — are illegal and likely to throw the financial aid system into further disarray.
“Treasury’s lack of expertise in the federal student aid system could be disastrous for the implementation of the latter phases of the IAA, as the federal student aid system is highly complex and administrative errors could endanger access to financial aid or statutory debt cancellation,” wrote the senators. “This ill-advised plan also ignores the laws of Congress.”
ED’s IAA with the Department of Labor for Career and Technical Education and Adult Education, programs which are a fraction of the size and less complex than student loan programs, have cost ED over $1 million in extra program costs and resulted in weeks-long delays in grant disbursements, harming students and schools.
“(I)t is reckless for ED to enter into another IAA with no information or clarity on the cost,” said the senators.
“The ED-Treasury IAA will set the stage for more dysfunction in a federal student aid system that the Trump Administration has already made more expensive and confusing to navigate…We call upon you to rescind these IAAs immediately,” concluded the lawmakers.
The senators asked Secretary McMahon and Secretary Bessent to provide details on the cost of transferring student loan administration to Treasury, basic information on the staff responsible for and the timing of the IAA, and how Treasury will be held accountable for poor performance in administering its new student loan responsibilities by April 15, 2026.
Senator Murray has aggressively pushed back against Secretary McMahon’s efforts to dismantle the Department, including through the illegal use of IAAs, and she fought to insert ironclad language in the fiscal year 2026 funding bill for the Department that would bar Secretary McMahon’s use of IAAs to dismantle the Department—but Republicans refused to include new, binding language. The final agreement did, however, make clear there is no legal authority for the Department of Education to slough off core responsibilities through these agreements.
The full text of the letter is available HERE.
###