If you have a federal student loan, a Pell Grant, or a kid filling out the FAFSA, one office handles all of it: Federal Student Aid, inside the U.S. Department of Education.
The Trump administration is now working to rip that office out of the department and turn it into a new, separate agency — without the law that would require.
The Washington Sun reported Thursday, citing three sources and internal documents, that the Education Department is rushing to spin off Federal Student Aid by October 1, 2027. The effort is being led by the office's chief operating officer, Richard Lucas, working with the White House budget office.
45 million borrowers, $1.6 trillion
This is not a small office. Federal Student Aid manages loans for about 45 million borrowers with $1.6 trillion in outstanding debt, the Sun reports. It's the biggest single piece of the Education Department.
And it's already been hollowed out. The office has lost 43% of its staff since Trump took office and is down to about 800 employees, according to the Sun.
They know it's against the law
Here is the key fact. Under current law, Federal Student Aid has to stay inside the Education Department. Department officials have acknowledged internally that making it independent would take an act of Congress, the Sun reports.
They haven't asked Congress. According to department officials and congressional staff, the administration hasn't even brought the plan to Capitol Hill.
The people who'd have to make it work aren't confident either. One official involved in the planning told the Sun that the office "does not know how to be independent," because it depends on the rest of the department for so much. Another called the plan "basically just a cartoon."
Melanie Storey of the National Association of Student Financial Aid Administrators — the people who run financial aid at colleges — was blunter about the deadline: "October of 2027, I mean come on." She called the work "extraordinarily complex."
The Education Department's spokesperson called the story "fake news," without saying what was wrong with it, and said the department is working to "restore FSA as a performance-based organization." The White House budget office called the report "inaccurate," also without explaining.
Part of a bigger teardown
This is the latest step in the administration's push to take the Education Department apart.
We've reported how Congress wrote down that dismantling the department was illegal — and Republicans let it happen anyway, with the student loan portfolio headed toward the Treasury Department. In July, a House committee chaired by Tim Walberg voted to break up the department and move Federal Student Aid to Treasury by law.
Those bills would have had to pass Congress. This plan skips that step.
Sen. Tammy Baldwin of Wisconsin called it "just another illegal move by the administration." Sen. Patty Murray of Washington called it "intentional sabotage" that threatens "true financial chaos" for families, according to Common Dreams.
Who gets hurt
When an office that's lost almost half its staff is ripped out of its department on a rushed deadline, the people who feel it are the ones on the other end of the phone: borrowers trying to fix a payment, students waiting on a Pell Grant, families trying to get a FAFSA through. Mike Pierce of the borrower-advocacy group Protect Borrowers called it a "secret plan to eject FSA from the Education Department."
What the documents show
The Trump administration is working to pull Federal Student Aid — which handles $1.6 trillion in loans for about 45 million borrowers — out of the Education Department by October 2027, according to internal documents reported by the Washington Sun. Department officials have acknowledged internally that the law requires an act of Congress to do it, and they haven't asked Congress. The office has already lost 43% of its staff.
Source
The Education Department Is Preparing to Offload Its Student Loan Office — The Washington Sun
