The dismantling of the Department of Education is underway, and because the D.O.E is the backbone of the entire federal financial aid system, the impact on federal student aid could be immediate and disruptive.
Here’s what that could mean in detail:
Major Disruption to Student Aid Access
- The FAFSA system (Free Application for Federal Student Aid), which is used by millions of students to apply for Pell Grants, work-study, and federal loans, is operated by the Department.
- If the Department is abolished without a solid transition plan, the entire application and disbursement process could stall, leaving students without a clear path to financial aid.
Federal Student Loans Could Be Paused or Privatized
- The D.O.E. currently oversees Direct Federal Loans, including subsidized, unsubsidized, PLUS, and consolidation loans.
- Without this oversight, the government might try to outsource the program to private lenders or states.
- This could mean higher interest rates, less favorable repayment terms, and reduced borrower protections (like income-driven repayment or loan forgiveness).
- Borrowers might lose access to programs like Public Service Loan Forgiveness (PSLF) or Teacher Loan Forgiveness, unless new mechanisms are created to replace them.
Pell Grants and Work-Study at Risk
- Pell Grants, which help low-income students pay for college, are administered by the D.O.E.
- Federal Work-Study programs are also coordinated and funded through the Department.
- Without federal oversight, these programs could face funding cuts or be turned over to states—creating big disparities in access depending on where a student lives.
Impact on Colleges and Universities
- Colleges rely heavily on federal aid systems to package student aid offers.
- Without the federal infrastructure, colleges might face:
- Delays in awarding aid
- Confusion in compliance requirements
- Uncertainty about funding levels year-to-year
Borrower Protections and Loan Servicing Uncertainty
- The Department regulates loan servicers and provides oversight on things like deferment, forbearance, income-driven repayment, and discharge options.
- Dismantling the D.O.E. could leave millions of borrowers in limbo, especially those relying on structured repayment plans or forgiveness options.
What happens next?
Congress will now have to pass legislation to reassign those responsibilities — either to another federal agency, states, or private contractors. But until that’s done, students and borrowers would likely face confusion, delays, and reduced access to aid.
So what can you do as a consumer?
Watch this quick video update to learn more.
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(Parts of this post were written with assistance by ChatGPT)
