Judge Blocks Trump’s Plan to Transfer .6 Trillion Student Loan Portfolio to SBA

Judge Blocks Trump’s Plan to Transfer $1.6 Trillion Student Loan Portfolio to SBA

Last updated May 27, 2025

Updates on Trump’s Plan to Transfer Student Loan Management to SBA

Introduction

The US Federal Judge’s recent decision may halt President Donald Trump’s proposal to move over $1.6 trillion student loan portfolio from the US Department of Education to the Small Business Administration (SBA).

Details of the Court’s Injunction

In the injunction issued on May 22, Judge Myong J. Joun of the U.S. District Court for the District of Massachusetts stated that the Trump administration is required to reinstate over 1,300 Department of Education employees. The directive to transfer the management of federal student loans out of the Department is postponed.

Reactions to the Announcement

The deputy assistant secretary for communications at the Education Department, Madi Biedermann, criticized the judge’s decision. The Trump administration has requested the order to be delayed while an appeal of the decision is being processed.

Impact on Student Loan Borrowers

According to Sarah Sattelmeyer, a project director at New America and senior advisor under the Biden administration, the news that student loans will stay with the Education Department for now is beneficial for borrowers. Consumer advocates are concerned that a mass transfer of accounts between federal agencies could lead to errors and compromise federal student loan borrowers’ privacy.

Concerns About the SBA’s Experience

Higher education expert Mark Kantrowitz voiced concerns about whether the SBA has relevant experience in managing federal student loans. It has been noted that any move of the loan portfolio to the SBA would ultimately require an act of Congress, as the Higher Education Act of 1965 designates the Education Department’s Federal Student Aid office responsible for the debt.

SBA’s Workforce Reduction and Its Implications

Further criticism of Trump’s proposed transfer is based on his administration’s announcement in March that the SBA’s workforce would be reduced by 43%. This reduction leaves fewer staff to manage the new responsibility.