- $1.6 trillion student loan portfolio moved from Education to SBA
- Special needs programs reassigned to HHS under RFK Jr.
- Legal challenges expected over Higher Education Act violations
- SBA workforce reduced by 43% since 2025 reorganization
- Uncertainty surrounds 1,000+ Federal Student Aid jobs
President Trump's surprise executive order Friday upended decades of education policy by transferring two major Department of Education functions to other agencies. The Small Business Administration will now manage the nation's $1.6 trillion student loan portfolio serving 43 million borrowers, while Health and Human Services assumes control of special needs initiatives and nutritional programs. Administration officials claim the changes will streamline services, but critics warn of bureaucratic chaos.
Legal experts immediately questioned the move's validity, citing the 1965 Higher Education Act that specifically designates student aid management to the Education Secretary. The American Federation of Teachers pledged litigation, with President Randi Weingarten declaring, This reckless shuffle violates both statutory mandates and common sense.Analysts note the SBA's diminished capacity after cutting 2,700 positions since 2025 raises concerns about managing a debt portfolio 800 times larger than its typical annual loan volume.
Three critical insights emerge from this policy shift:
- Loan servicing delays could worsen as SBA inherits systems handling 150x more borrowers
- Special needs families may face service gaps during HHS transition
- California announces emergency funding to preserve state-level student aid programs
The administration provided no transition timeline but confirmed Federal Student Aid employees won't automatically transfer to SBA. This creates uncertainty for 1,200 specialists managing income-driven repayment plans and loan forgiveness programs. Education advocates warn that disrupting these teams could delay critical updates for borrowers nearing repayment milestones.
Regional impacts are already materializing. Texas education officials reported a 300% surge in student loan hotline calls Monday, while Michigan's disability services coordinator described panicamong families relying on soon-to-be-transferred programs. A Florida case study reveals potential pitfalls: When the state shifted vocational training to Labor in 2023, enrollment dropped 18% due to confusing referral processes.
White House Press Secretary Karine Jean-Pierre defended the move, stating, This realignment returns power to local communities.However, former Education Secretary Arne Duncan countered, You don't improve services by dismantling expertise - this is political theater with real consequences for vulnerable Americans.