Warren calls for Education Department to 'rescind' student loan transfer to Treasury
Sen. Elizabeth Warren, D-Mass., is petitioning the Department of Education to stop its transfer of federal student aid services to the Department of Treasury in her latest effort to halt the dismantling of the agency.
Thursday marks the one year anniversary of Warren's "Save Our Schools" campaign -- her wide-scale investigation against President Donald Trump and Secretary of Education Linda McMahon's attempts to shutter the Education Department.
“Since Day One, the Trump administration has raised costs for borrowers and tried to undermine our public schools,” Warren said in a statement first obtained by ABC News. “I’ve fought back every step of the way, and I’ll keep fighting to protect our students, teachers, and families,” she said.
Warren told ABC News last year that her campaign would use a combination of federal investigations and oversight to do everything she can to fight back and defend public education.
Warren's campaign has since triggered the Government Accountability Office (GAO) to probe the department dismantling, an agency watchdog investigation into the Department of Government Efficiency's alleged "infiltration" of the Office of Federal Student Aid's sensitive data systems, and other legal actions opposing the Trump administration's overhaul of the agency.
Warren and top Democratic senators on education-related committees sent a letter to McMahon and Treasury Secretary Scott Bessent on Wednesday, urging the officials to immediately "rescind" the interagency partnership reached in March.
"The Trump Administration continues to move forward with illegal Interagency Agreements (IAAs) dismantling the Education Department (ED)," the lawmakers wrote in the letter, arguing "This latest illegal scheme from the Trump Administration threatens to trap student loan borrowers, students, and families in chaos and bureaucracy, all while American taxpayers are left to foot the bill for Treasury to administer programs that ED can and should administer itself, likely costing more money and burying borrowers and families in unnecessary red tape."
The most recent agreement includes sending the nearly $1.7 trillion student loan portfolio to Treasury through a multi-phase process to procure the financial aid programs.
“With the student loan portfolio approaching $1.7 trillion and defaults nearing 25 percent, now is the time for a hard reset in how the federal government provides and services student loans,” Department of Education Press Secretary for Higher Education Ellen Keast wrote in a statement to ABC News. “We are confident that our partnership with the Treasury, an experienced and proven fiduciary, will strengthen program administration and better serve American students, borrowers, and taxpayers,” Keast wrote.
The Democratic lawmakers accuse the agencies of breaking the Consolidated Appropriations Act of 2026, which funds the administration of federal student aid and student loan servicing through the Department of Education. They argue that the myriad changes to federal agencies -- including the massive reductions in workforce at Education and Treasury -- will also result in harming millions of Americans who rely on the expertise of federal student aid civil servants. In 2025, the Trump administration cut over 40% of Education Department employees and nearly a quarter of Treasury staffers, according to an analysis by the Pew Research Center.
Their letter said moving statutory student aid programs, such as the Free Application for Federal Student Aid (FAFSA) and Pell Grants, is not only illegal but likely to throw the financial aid system into disarray.
McMahon has previously stressed that she is not defunding federal programs and will continue to perform all of the agency's "statutory duties." A senior Department of Education official said the agency has broad authority to move the services. Interagency agreements are a frequently used tool that Education has engaged in with other partner agencies more than 200 times over the years, the senior department official said on a call with reporters.
Meanwhile, the Education Department has phased out Biden-era student loan repayment plans, saying it is to streamline the process impacting more than 40 million borrowers. Under the Working Families Tax Cuts Act signed into law by Trump last summer, a new income-driven repayment plan will be made available for borrowers on July 1. The Democratic lawmakers fear that student loan borrowers are now left with limited options and guidance while increasing the number of borrowers in default and "economic distress," according to the letter.
However, Andrew Gillen of the libertarian think tank Cato Institute's Center for Educational Freedom noted the move should be welcome news for Americans.
"This will benefit students by streamlining the aid application and student loan repayment processes and save taxpayers money by reducing losses on student loans," Gillen wrote in a statement to ABC News.
Student loan advocates, like Aissa Canchola Bañez, policy director at Protect Borrowers, decried the interagency agreement. Bañez called the announcement irresponsible and reckless, demanding Congress guarantee that the Treasury Department is equipped with the appropriate staff to support borrowers.
"For too long, borrowers have been failed at every turn -- they don't deserve to be failed again by an agency that isn't ready to protect them," she wrote in a statement to ABC News.
