WSJ Your Money Briefing - Student Loan Confusion Grows as Trump Moves to Shut Down Education Department

Episode Date: March 27, 2025

President Trump's recent executive order to dissolve the Education Department has left many student loan borrowers in limbo. Wall Street Journal reporter Oyin Adedoyin joins host Dalvin Brown to discuss what this means for the $1.7 trillion in federal student loans held by nearly 45 million Americans. Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

With record levels of dry powder available for investment, find out what's in store for private markets in 2025 and beyond. Listen to Crafting Capital in partnership with UBS at partners.wsj.com slash UBS, Spotify and Apple podcasts. Here's your money briefing for Thursday, March 27th. I'm Dalvin Brown for the Wall Street Journal. Federal student loan borrowers have faced a series of setbacks, from stalled forgiveness efforts to a rocky FAFSA rollout.

Now they say they're left with even more questions, after the Trump administration moves to dismantle the very office that has handled those loans for decades. A lot of student loan advisors and folks in financial aid are just unsure of what to expect next. So they're telling borrowers and students to stay the course of whatever their original plans were and just to stay abreast for new news updates. We'll hear from Wall Street Journal reporter Oyen Adedoyin about what's next, after the break. Americans love using their credit cards, the most secure and hassle-free way to pay. But DC politicians want to change that with the Durbin Marshall credit card bill. This bill lets corporate megastores pick how your credit card is processed, allowing them to use untested payment networks that jeopardize your data security and rewards. Corporate megastores will make more money and you pay the price.

Tell Congress to Guard your card because Americans lose when politicians choose. Learn more at guardyourcard.com. President Trump has set in motion plans to break down the education department, which manages roughly $1.7 trillion in student loans. The news has left many borrowers wondering what this could mean for their debt. One of them is Olivia Hardy. She's a Broadway performer in New York City who still owes about $10,000.

Are my interest rates affected? Is my loan provider affected? Like, who exactly am I now paying this to? I think it is kind of a weird limbo that we're stuck in of just kind of like, well, I guess I'll just continue doing what I always have until something tells me that I shouldn't be doing this and then I'll have to figure it out from there. And David Taylor.

He's a student at Liberty University and is trying to figure out if his loans will be available in time for summer school. And I've got to make a student at Liberty University and is trying to figure out if his loans will be available in time for summer school. And I've got to make a decision before the end of April. If I can be assured that I can get the same type of loan that I've been getting on the same terms that I've been getting, I would need to know extremely soon of what the new terms may or may not be

in order to make that informed decision. You know, am I going to eat Kraft macaroni and cheese and ramen noodles so I can pay for school or am I going to continue living my lifestyle and put school on hold? Wall Street Journal reporter Oyin Adedoyin joins me to discuss the story we wrote together, explaining what borrowers like David and Olivia need to know. Oyin, let's start with the basics. What exactly did Trump's executive order say about the education department and specifically about student loans? The main directive for Trump's executive order

was to return education back to the states. And that has a lot to do with K-12 funding and education directives and curriculum. The executive order also assigned Education Secretary Linda McMahon to facilitate the closure of the department to the maximum extent possible by law. Now the Education Department has already been under a lot of stress with more than half of its workforce being cut and a lot of those employees were responsible for quality assurance regarding student loans. And so it's been just over a week since that news broke. What have you

seen or heard from borrowers since then? There's been lots of confusion and anxiety. You have to understand where we're at now. It's already been a really confusing few years for student borrowers. When the pandemic hit, their loans were paused. They didn't have to repay them. And then the Biden administration set on a host of student loan repayment programs that made student loans cheaper and more accessible for borrowers.

It made student loan forgiveness more attainable. And so now borrowers are hearing a different tune. Now the SAVE plan, which is one of the main income-driven repayment plans, is under litigation, and many of those borrowers are in a forbearance period, which means that they don't have to pay back their loans right now. But many other borrowers aren't. And so you can just imagine all of the chaos and confusion right now with borrowers who are even paying attention to the news, wondering, what do I do now?

We reported that Trump said that the Small Business Administration would, quote, handle all of the student loan portfolio. Have you seen any clarification since then about how a transition might actually work, or what that timeline might look like? I haven't seen any clarification on that, and we haven't heard back from the Trump administration

elaborating further on what that would look like. Academics and former Education Department officials do say that this transition to the SBA would be chaotic because the SBA does not have the sufficient resources to handle the student loan portfolio. So there's a lot of concerns about that because dealing with student loans isn't purely financial, it's also inter-communicating between student loan servicers and borrowers and streamlining various processes between income driven repayment applications and student loan forgiveness qualifications. So there's a lot of nuance that goes into this job and it would be pretty hard to transition seamlessly in a short amount

of time. Got it. And looking ahead, what announcements should borrowers and families be on the lookout for in the coming weeks? While things are still being in flux, it is expected that income-driven repayment plans will be made available again for borrowers. So they should keep an eye out for that on the Education Department site. They should also just keep staying attuned to the news and the changes of what's happening.

It sounds like the expectation is that things should run the way that they've always run to some degree. That is the hope. A lot of student loan advisors and folks in financial aid are just unsure of what to expect next. So they're telling borrowers and students to stay the course of whatever their original plans were and just to stay abreast for news updates.

Yeah, how are schools responding to this news? Like are colleges and universities making any changes at all to financial aid or offering guidance to their students? I think it's still too soon to tell on this one. I haven't heard yet of any colleges or universities changing their guidance or their directives, but colleges and universities are definitely thinking about this and trying to anticipate any changes.

You know, we are a little over a year out from when the changes to the new FAFSA really shook up the college application timeline and financial aid offices. So I feel like financial aid offices are honestly still recovering from that. And this is just another wave that could potentially shake things up for them. Yeah. And doubling back to one of the biggest questions, I think, on borrowers' minds, which is, do they still have to pay back these loans? Are they still responsible for them?

They still have to pay back these loans? Are they still responsible for them? They still have to pay back these loans as much as I know borrowers hate that answer. There is not going to be a view in this where suddenly all of their student loans are going to be forgiven or zapped into the ether. They're still going to have to pay that money back one way or another. So it's honestly even more important now than ever to make sure you know how much you owe, what your payments are, things like that. Before we go, heads up. We corrected yesterday's episode.

An earlier version incorrectly said men are now more likely to have gone to college. It's been corrected to say more women than men are attending college. That's WSJ reporter Oyen Adedoyen. And that's it for your Money Briefing. This episode was produced by Ariana Asparu with supervising producer Melanie Roy.

I'm Dalvin Brown for The Wall Street Journal. Thanks for watching!