What You Need to Know About the U.S. Department of Education and Federal Student Loans
Recent headlines have indicated that changes may be coming to the U.S. Department of Education under the new administration. This has raised questions and concerns for current federal student loan borrowers as well as future college students. Here’s what you need to know based on the information we have so far:
What is the U.S. Department of Education?
While it is often known for providing financial aid for college students such as the Pell Grant and federal student loans, the U.S. Department of Education (or ED) operates programs at every level of education throughout the United States. According to its website, “ED’s mission is to promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access.” The part of the department that focuses on higher education is the office of Federal Student Aid.
What should current federal student loan borrowers know?
This is not the first time such changes have been proposed; President Reagan called for an end of ED in 1982, but ultimately it remained in place. In order for the Department of Education to be dissolved, Congressional approval would be necessary.
Regardless, borrowers who have federal student loans in repayment should prepare for the possibility of fewer federal student loan forgiveness options and possibly higher monthly payments. Several key Biden administration initiatives are facing challenges or could be revamped, including the 2023 SAVE plan that reduced or eliminated student loan payments for many borrowers.
Take inventory of your current student loans, including their balances, interest rates, and servicers, and save a record of your payment history. These items will be helpful should any changes be implemented, or if you wish to consider refinancing your student loans in the future.
Would I still have to pay back my federal student loans?
Yes. Even if the Department of Education no longer exists in its current capacity, its funding programs would likely be reassigned to other agencies such as the U.S. Treasury Department or state governments.
Will this affect private student loans like those offered by credit unions?
No – like the policies and changes implemented at the start of the COVID pandemic, ED policies do not directly impact private student loans and lenders. Student Choice and our credit union lenders will continue to provide responsible student lending solutions to help families pay for college. (For more information on the differences between federal and private student loans, check out our Private vs. PLUS Loans guide.)
