Following President Trump’s executive order calling for the elimination of the Department of Education and his announcement that the $1.6 trillion federal student loan portfolio will be transferred to the Small Business Administration, higher education institutions are preparing for significant operational changes.
The initial order, signed on March 20th, 2025 at 12:30 PM California time, directed Education Secretary Linda McMahon “to take all necessary steps to facilitate the closure of the Department of Education and return education authority to the States, while continuing to ensure the effective and uninterrupted delivery of services, programs, and benefits on which Americans rely.”
In a follow-up announcement on March 21st from the Oval Office, President Trump stated that the transfer of student loan administration to the Small Business Administration would take place “immediately,” promising that the restructuring would “work out very well” and provide “great education, much better than it is now, at half the cost.”
With approximately 42 million Americans holding federal student loans—including nearly 3.9 million borrowers in California—universities are now examining how loan administration will function under the Small Business Administration rather than Treasury Department oversight that experts like Betsy Mayotte from The Institute of Student Loan Advisors had initially suggested as likely.
“While borrowers will still need to repay their loans regardless of which agency manages them, universities are preparing for significant operational changes in how financial aid is processed and administered,” says Dell Holden, Director of Sales – Education Division at Cedar Financial. “Institutions that have built their financial systems around Department of Education protocols now face the challenge of adapting to an entirely new federal agency’s procedures.”
Financial experts are monitoring several implications of this transition:
- The Small Business Administration’s capacity to manage the nation’s student loan portfolio
- Special education services and nutrition programs moving to the Department of Health and Human Services
- How quickly universities can adapt their financial systems to work with the SBA
- Potential changes to loan servicing, disbursement, and collection processes
Cedar Financial works with universities nationwide on financial management strategies and is assisting institutions in preparing for this unprecedented transition to ensure financial operations continue smoothly during this period of significant change.
