Treasury Takes Key Step in $1.7 Trillion Student-Loan Transfer

The transfer follows the Education Department's March announcement that it would hand over management of the student-loan portfolio to Treasury, starting with the accounts of borrowers in default. The move is part of the Trump administration's broader push to dismantle the Education Department and shift its functions to other agencies.

The consequences of default include wage garnishment and seizure of federal benefits such as Social Security. Those involuntary collection efforts have been paused since January, and the Trump administration has not said when the pause will end.

Former administration officials told Business Insider it is unclear whether Treasury is equipped to handle the $1.7 trillion portfolio, given the complexity of student-loan repayment. A pilot program under the Obama administration in 2015 took over a slice of defaulted accounts but collected at lower rates than private agencies, the former officials said.

Mason Champion, Treasury's assistant secretary, wrote in a May letter to lawmakers that the agency reached an agreement with the Education Department to transfer seven Education employees to Treasury and two Treasury employees to Education. Champion said the exchanges will "support the implementation of the partnership, with an initial focus on the transition of operational responsibility for the defaulted portfolio to Treasury."

Lawmakers have taken sides. Over 60 Democratic lawmakers called in a June letter for a halt to the transfer, citing record-high default rates. A month later, Republican lawmakers introduced a bill to codify the plan.