The Department of Education's financial arm, which provides direct loans to borrowers and oversees trillions of dollars in student debt, faces an uncertain future as President Donald Trump gets ready to order the agency's dismantling. According to interviews with over a dozen current and former department employees, the uncertainty is exacerbated by steep staff cuts and a lack of communication.

Trump has attempted to disband or transfer the department's policy machinery to other departments, but the $1.64 trillion financial portfolio is run independently. However, Trump admitted on Thursday that his attempt to close the agency was hampered by the enormous loan balance.

Trump told reporters in the Oval Office, "We've actually had that discussion today," implying that the debt might end up at the Small Business Administration, Treasury, or Commerce. Kelly Loeffler, the administrator of the SBA, "would really like to do it," he said.

An additional concern is whether the government will continue to lend money to students directly.

The Heritage Foundation's Project 2025, which was written by a number of Trump supporters despite Trump's attempts to disassociate himself from it during the campaign, recommended that a new organization be set up to make future loan payments, with a board of trustees and a leader confirmed by the Senate. However, the government would return to its function as guarantor of loans underwritten by other businesses, leaving the direct loan-making business. Congress would provide funding for the new organization, which would aim to "treat taxpayers like investors."

The Heritage Foundation economist Lindsey Burke argues in the report, "Taxpayers should expect those borrowers to repay when the federal government lends money to individuals for a postsecondary education."

According to Project 2025, the Treasury Department should take over existing loans in order to handle defaults and collections.

It's unclear how Treasury would handle the portfolio. According to those familiar with the statistics, almost 40% of the loans are currently late, or behind in payment; the missed payments are recorded on the borrower's credit report after 90 days, and the loan formally enters default after 270 days without payment.

As consumers adjust to the end of a multi-year loan payment standstill and shifts to more manageable payment plans, experts caution that a wave of new defaults may be on the horizon.

One senior Education Department staffer who recently left observed, "It's a tidal wave coming for an unprepared village." "The consequences are now more than just hypothetical."

The Education Department hired contractors to increase communication and provide alternative payment alternatives in an effort to keep borrowers up to date on their loans and prevent them from falling off these financial cliffs. Current and former Education employees informed CNN that Accenture, an outside firm whose contract DOGE canceled, was responsible for the creation and distribution of the pre-default emails.

The former employee stated, "The more affordable [repayment] plans are going away, and the people who would write those e-mails have been fired." "The government almost seems unwilling to accept payment."

A request for comment from the White House was not answered.

Borrowers' alternatives are getting smaller.
After months of legal challenges, the Department's decision to suspend payment plans based on borrowers' income has caused more uncertainty for borrowers who are already dealing with weeks of overworked staff and backlogs in customer support.

A set of more reasonable payment plans called "SAVE" were established by the Biden administration in 2022, allowing borrowers to cap their monthly student loan payments at 5% of their income rather than the prior 10%. Republican state attorneys general filed a lawsuit, claiming the plans were too generous and that people without college degrees were funding them.

The Education Department has deleted applications for all income-driven repayment plans from its website in an effort to comply with a judge's order to terminate the SAVE plan. This effectively prevents borrowers from changing their plans in the event that they are unable to pay the regular rate.

Nicolas Salem worked as an analyst at the Consumer Financial Protection Bureau for over three years, paying $250 a month to settle the $25,000 in debt he accumulated while attending Tufts University. His salary abruptly dropped to zero when he and his entire division were let go from the CFPB.

He's struggling to deal with the difficulty, too, as he has no way to modify his payments and has been unable to get in touch with his loan servicer, Mohela, despite spending more than 17 hours on wait.

In an interview with CNN, Salem said, "I think I'm going to have to move," describing the payments as a "extreme drain" on his savings.

In order to determine if some income-based repayment plans that weren't fully covered by the injunction may be reinstated on the website, Office of Federal Student Aid officials met on Thursday. One participant in the meeting stated that the newly appointed attorneys at the agency are now responsible for the outcome.

It is anticipated that the remaining income-based repayment options will be more expensive for debtors.

One FSA employee told CNN, "We have been informed that 'SAVE' will not be returning in any form or fashion."

Tense teams and poor communication
Within a few weeks of the April 1 admissions deadline, colleges and universities are anticipated to notify admitted students about qualified aid packages.

However, Education staff told CNN that the department hasn't been able to communicate with borrowers, servicers, or schools on how to handle the upcoming changes. Additionally, a large number of employees who had institutionalized knowledge of the aid programs were let go or sacked.

In January, Elon Musk-inspired "fork in the road" letters were sent to Education Department employees and those at other federal agencies, stating that they could quit their jobs and still earn their salaries if they resigned by September 30. The department then made buyout offers of up to $25,000 to specific employees this past weekend.

According to staff members briefed on the figures, around 25% of the 1,500 employees in the Student Aid division are leaving as a result of those two initiatives.

The department is currently getting ready for significant layoffs that will likely affect the bulk of its surviving staff.

"There is reason to worry about how the system will function if [Trump] announces, 'We're going to have a 50% reduction in staff.' Is that enough people?" says Neal McCluskey, who is the head of the Cato Institute's Center for Educational Freedom. "We will discover if they can function effectively with fewer of them."

Due to budget limitations, FSA would have to continue to operate with a smaller number of employees and outside contractors who carried out essential tasks.

In a public LinkedIn post, FSA's Executive Director of Loan Portfolio Management, Colleen Campbell, stated, "I'm afraid of what the coming days, weeks, months, and years will bring—not just for me and the Department, but for the borrowers we serve." Campbell claimed to be working in a "impossible environment" with her shrinking workforce.

In 2024, the Department encountered criticism following a makeover of the Free Application for Federal Student assistance, or FAFSA, the student assistance application form. In several situations, the poorly executed rollout caused months-long delays in aid disbursements and confused applicants.

In 2024, a number of US Digital Service employees were assigned to the Education Department to help with the process. According to agency sources, those workers were among the 21 USDS personnel who quit in protest of an attempt by Musk's Department of Government Efficiency staff to obtain private information.

According to experts, the FAFSA implementation serves as a warning about potential future developments.

The Institute for College Access and Success's senior director, Michele Shepard Zambini, states, "We already witnessed the impact of not receiving enough appropriated money to manage the FAFSA process." "It's concerning that so many career staff have left."