Student Loan Forgiveness: Answers Borrowers Need Now

Rumors continue flying on social media about student loan forgiveness. In our previous article “Student Loan Forgiveness: Could the New Administration Claw Back Your Award?” we described how a reported audit of sensitive student records inside the U.S. Department of Education by DOGE, the Department of Governmental Efficiency Service run by Elon Musk, prompted college students to spread rumors on TikTok. Even though some of their videos had received over 10 million views, these influencers’ claim—that DOGE’s audit should result in student loan forgiveness because it broke a 1974 privacy law—was incorrect.

But now the influencers are back, and they’re spreading more rumors. Apparently expecting mass debt cancellation, this time they’re arguing that a potential shutdown of the Education Department should result in student loan forgiveness. These rumors appear to have kicked off on February 4 after a press conference when President Trump described his plans for Linda McMahon, his choice for education secretary. According to this Newsweek video, the president said “I want Linda to put herself out of a job” by shutting down the Department.

Below we answer key questions that fueled this latest round of rumors. Here’s what student loan borrowers should know now.

During the Carter Administration, in 1979, an act of Congress split off the Department of Education from the older Department of Health, Education and Welfare (HEW). Time Magazine’s former editor Richard Stengel describes the launch this way:

In 1976, presidential candidate Jimmy Carter, whose first public office in Georgia was a county school commissioner, campaigned for the creation of a cabinet-level Department of Education which would consolidate, streamline, and elevate educational programs through the government. He believed the federal government needed to be a better partner with the states, where most of education spending resided. . .

Carter proclaimed the importance of education to the nation’s security and its future, and sought to increase the accountability of federal education programs to the president. The act creating the department also cited part of its mission this way: “To strengthen the Federal commitment to ensuring access to equal educational opportunity for every individual.”

ED’s launch followed decades of expanded federal education funding. Those efforts started with Sputnik-era and Cold War math and science initiatives, followed by President Lyndon Johnson’s landmark Higher Education Act of 1965, which attempted to open college access irrespective of any student’s ethnicity, gender, or socioeconomic background.

Measured by headcount, ED is the smallest Cabinet-level agency, with only about 4,100 employees at the end of the Biden Administration. However, its budget of $270 billion—or 2.3 percent of the federal government’s $9.7 trillion budget—ranks as the sixth largest. Along with federal antidiscrimination laws, that funding gives ED substantial influence on state and local education programs, even though those governments retain principal control over education as well as provide about 92 percent of the funding for public schools.

ED only has three main functions. The Department primarily supports low-income college students. It also funds K-12 education for two public school constituencies: disadvantaged students in low-income districts, and special education students.

Most funding supports the Department’s traditional mission of “guaranteeing equal access to higher education” by providing pathways for qualified students who couldn’t otherwise afford college degrees. Accordingly, about three-quarters of ED’s budget is allocated to higher education via the Federal Student Aid division. FSA administers the $2 trillion Direct Loans program, along with the Student Financial Assistance (SFA) division that provides non-debt financial support through need-based grants and work-study jobs.

A little-known fact is the extent to which the Federal Student Aid programs benefit traditionally underrepresented undergraduates, such as first-generation, minority, and women students. According to the American Association of University Women, women currently hold two-thirds of all student loan debt, they tend to average higher balances, and women of color hold the highest balances. For example, the average American borrower carries about $30,000 of student debt a year after graduation, but Black women owe, on average, $41,466, and Pacific Islander women owe $38,747, in contrast to white women who owe $33,851.

Moreover, the cornerstone of Federal Student Aid is SFA’s Pell Grant program which assists families earning less than $60,000 annually. Because of increases during the Biden Administration, Pell Grants currently provide about $29,000 towards a baccalaureate degree. Pell recipients make up about 60 percent of the student borrower population, and Black students are about twice as likely to receive Pell Grants as their White classmates.

For K-12 public schools, the Department mainly allocates grants to fund educational programs in disadvantaged, low-income districts. ED also pays for programs that state and local districts often cannot or will not fund, such as those for disabled and special education students. Civil rights attorney Robert Kim, the executive director of the Newark-based Education Law Center, told the Christian Science Monitor that the Education Department’s role is “by and large, to provide extra support to states and districts for the neediest students.”

Contrary to the latest rumors on TikTok and other social media platforms, student loans will continue even if the Department of Education no longer exists.

The reason is that the promissory notes that student loan borrowers sign are contracts. And those contracts aren’t negotiated between the borrower and the Education Department as parties—they’re contracts between the borrower and the United States Government.

That means those obligations to the federal government will continue even if ED no longer exists in its present form. However, that fact also implies that the federal government will still need to allocate the resources necessary to manage those obligations in some agency or department, which probably would include funding hundreds of career civil servants along with their specialized computer systems. It remains unclear how simply moving those functions to new offices might save significant amounts of money.

Project 2025, the conservative playbook published in 2023 by the Heritage Foundation, doesn’t actually advocate shutting down the Department. It instead recommends transferring control of the Federal Student Aid division or its Direct Loans program to another federal Cabinet agency. Following that playbook, S.5384—a bill introduced in December by South Dakota Senator Mike Rounds—simply shifts core ED functions like the student loan portfolio and civil rights enforcement to other agencies.

Many experts believe that the Treasury Department would provide the most sensible option as a home for much of the Education Department’s functions, although other agencies like the Justice Department have been proposed to house ED’s civil rights office. Project 2025 also suggests that the Administration might instead want to create a new government corporation specifically to run the Direct Loans program, which ironically is also the type of corporate entity proposed by the Administration that might allow the banned Chinese web platform TikTok to continue operating in the United States with new ownership.

However, as we point out in the next section, it’s not clear how it would be possible to transfer to another federal agency those functions specifically granted to the Education Department by Congress. Many borrower advocates and other experts believe that Congress would have to mandate such transfers. And Congress might also need to specifically prevent another agency like the Treasury Department from transferring the administration of some student loan programs to expensive private banks.

Most experts don’t believe that the Administration will be able to abolish the Department. That’s because an act of Congress established the Department, and only an act of Congress can abolish it. But even if they wanted to pass such legislation, the Republicans don’t have the votes.

Because Senate Republicans have no plans to abolish the filibuster, the Senate rules require a supermajority of 60 votes to pass the legislation required to dismantle a Cabinet agency. But only 53 Republicans hold Senate seats, and there’s no way that seven Democrats would ever break ranks and go along with the Republicans on this sort of measure.

Keep in mind that acts of Congress already require many responsibilities within the Department of Education, and those responsibilities can’t be changed or moved to another agency without authorization from Congress. This is why any presidential executive order that defunds or removes responsibilities from the Department of Education needs to be meticulously drafted to sidestep all the Congressionally mandated responsibilities. Otherwise, that executive order is unlikely to survive a challenge in a federal court.

From the Washington Post:

Project 2025 recommended that the student loan program move to the Treasury Department and civil rights enforcement shift to the Justice Department.

But even those moves would require congressional action, experts said. The 1979 law that established the department specifies that the agency “shall” include many of its major responsibilities, including an Office for Civil Rights and an Office of Elementary and Secondary Education.

A separate statute, the Higher Education Act, specifies that the federal student aid office be housed in the Education Department. There has been some bipartisan interest in moving some of these functions out of the department in the past, but it’s unclear if Democrats would go along in this environment.

Those functions cited by the Post are just scratching the surface of all the federal education programs created by Congress long before the Education Department launched in 1979. According to Dr. Frederick Hess, the director of educational policy studies at the conservative American Enterprise Institute:

These include the Morrill Land-Grant Act of 1862, the Smith-Hughes Vocational Education Act of 1917, the National Defense Education Act of 1958, and the Higher Education and Elementary and Secondary Education Acts of 1965.

Dr. Hess argues that Republicans might go along with moving some of the Education Department’s functions to another agency, but most of those lawmakers are not OK with cutting the funding of popular, large-scale ED programs on which their constituents within key voting blocs depend:

Republicans have shown little appetite when it comes to cutting the major federal education programs, such as Title I for high-poverty schools ($18 billion a year), special education funding ($16 billion a year), and Pell Grants and Work Study for low-income students in postsecondary education ($31 billion a year). Whether or not there’s a Department of Education, those programs aren’t going anywhere unless Congress chooses to cut them.

Like President Reagan, is President Trump likely to back down when he finds out there’s not enough support in Congress for abolishing the Department, even among Republicans? He can sign an executive order as a first step, but like Reagan, President Trump may quickly conclude that winning Congressional support would require way too much of his time, effort, and political capital—and deem the initiative to be a lost cause.

In a January 2025 op-ed published by The Hill, that’s what Dr. Pedro Noguera and Dr. Louis Freedberg argue. Dr. Noguera is the dean of the Rossier School of Education at the University of Southern California in Los Angeles, and Dr. Freedberg is the chief executive officer at the influential California education news outlet EdSource.

They argue that the Education Department survived decades of attacks because so many Republican legislators supported the key programs managed by the Department. For example, they point out that a large segment of the resources in the $18 billion Title I program directs funding to schools with large numbers of low-income students; many of those schools are in red states, and especially in rural areas. Similarly, funding special education has long received bipartisan support; “children with disabilities live in pro-Trump areas too, and their parents are often well-organized and effective at advocating for their rights,” they say.

Dr. Noguera and Dr. Freedberg conclude by emphasizing that programs promoting college affordability would certainly receive steadfast support from the GOP:

Cutting the popular $24 billion Pell Grant program could generate fierce bipartisan resistance. Transferring the department’s oversight of $2 trillion in student loans to private banks that are likely to raise interest rates would also be regarded as highly problematic.