Trump says Education Department will no longer oversee student loans, ‘special needs’

President Donald Trump continued the unwinding of the U.S. Department of Education on Friday, announcing that the management of the entire federal student loan portfolio and of the department’s “special needs” programs would be moved to other federal agencies effective immediately.

Appearing in the Oval Office with Defense Secretary Pete Hegseth, Trump said, “I’ve decided that the SBA, the Small Business Administration, headed by Kelly Loeffler, a terrific person, will handle all of the student loan portfolio. We have a portfolio that’s very large,” Trump said.

The federal student loan portfolio – which manages about $1.6 trillion in loans for roughly 43 million borrowers – is currently overseen by the Education Department’s office of Federal Student Aid (FSA). That office has been gutted by the recent raft of buyouts, early retirements and last week’s broad reduction-in-force.

It was not clear, based on Trump’s announcement, how or if the remaining employees and expertise at FSA would be transferred to the Small Business Administration. Trump said he would move student loans “out of the Department of Education immediately” and that Loeffler and her staff are “all set for it. They’re waiting for it. It’ll be serviced much better than it has in the past. It’s been a mess.”

In a tweet after the Oval Office announcement, Loeffler said, “The SBA stands ready to take the lead on restoring accountability and integrity to America’s student loan portfolio.”

Multiple sources at FSA who could not speak publicly for fear of retribution said they were blindsided by the news.

The office of Federal Student Aid referred NPR’s request for comment to the Education Department.

The Education Department, White House and the Small Business Administration did not immediately respond to a request for comment.

As recently as Thursday, White House press secretary Karoline Leavitt assured reporters that, “when it comes to student loans and Pell Grants, those will still be run out of the Department of Education.”

After announcing the movement of the federal student loan portfolio, Trump then said, “Bobby Kennedy, the Health and Human Services, will be handling special needs.”

This appears to be a reference to the federal law known as the Individuals with Disabilities Education Act (IDEA), which the Education Department administers. The law guarantees students with disabilities the right to a free, appropriate education and, in 2024, sent roughly $15 billion to schools to help pay for special education services.

The Education Department also has a dedicated Office of Special Education Programs.

The Department of Health and Human Services, headed by Secretary Robert F. Kennedy, did not respond to multiple requests for comment.

In speaking to reporters Thursday, Leavitt also suggested IDEA funding would remain at the department, saying “any critical functions of the department” would remain. When asked specifically about funding for students with disabilities, she responded: “Same answer.”

Administration of IDEA and the federal student loan portfolio are two of the Education Department’s core responsibilities, and it’s unclear if transferring either to other federal agencies can be done without a vote of Congress.

The news comes a day after Trump signed an executive order calling on U.S. Secretary of Education Linda McMahon to “take all necessary steps to facilitate the closure of the Department of Education.”

This is a developing story and will be updated as NPR learns more.