Federal Judge blocks Trump administration's plan to transfer student loan management to SBA
Shreeaa Rathi | TIMESOFINDIA.COM | May 28, 2025, 21:28 IST
( Image credit : AP, TOIGLOBAL )
In a significant ruling from a Massachusetts court, a judge has halted the Trump administration's initiative to relocate student loans to a different agency. This landmark decision protects $1.6 trillion in loans and impacts more than 40 million borrowers. While some celebrate this verdict as a victory for student loan holders, critics argue it represents judicial overreach.
A federal judge blocked the Trump administration's plan to transfer the $1.6 trillion student loan portfolio from the Education Department to the Small Business Administration (SBA) in May 2025, citing the need to reinstate over 1,300 Education Department employees and preventing the transfer of federal student loan management. The judge's preliminary injunction prevents the Trump administration from moving forward with the plan announced in March, which aimed to shift more than 40 million student loan accounts to the SBA. The decision has sparked debate, with the Education Department criticizing the judge's intervention and consumer advocates expressing relief that the loans will remain with the Education Department for now.
Judge Myong J. Joun of U.S. District Court for the District of Massachusetts issued the preliminary injunction on May 22. The injunction blocked the Trump administration from carrying out the directive to transfer management of federal student loans and special education functions out of the Department of Education.
Trump had announced the plan to transfer the student loan portfolio on March 21. He stated that the SBA was prepared for the transition.
\"They're all set for it,\" the president said of the SBA at the time. \"They're waiting for it.\"
Madi Biedermann, deputy assistant secretary for communications at the Education Department, criticized the judge's decision. She described it as an overreach based on a complaint from biased plaintiffs.
\"Once again, a far-left Judge has dramatically overstepped his authority, based on a complaint from biased plaintiffs, and issued an injunction against the obviously lawful efforts to make the Department of Education more efficient and functional for the American people,\" Biedermann wrote in a statement to CNBC on Thursday.
The Trump administration requested a stay pending an appeal of the decision.
Sarah Sattelmeyer, a project director at New America and senior advisor under the Biden administration, viewed the decision as positive for borrowers. She argued that transferring the loans would have created confusion and reduced the effectiveness of programs designed to help students access education.
\"Instead of increasing efficiency, the movement of the Department's core functions would have increased confusion and decreased the effectiveness of programs that students depend on to access education,\" Sattelmeyer said.
Consumer advocates had expressed concerns that transferring accounts between federal agencies could lead to errors and compromise borrowers' privacy. They noted that similar problems had occurred during smaller transfers between loan servicers.
Advocates also raised concerns about the potential impact on borrower protections and programs like Public Service Loan Forgiveness.
Higher education expert Mark Kantrowitz pointed out the SBA's lack of experience in managing federal student loans. He added that moving the loan portfolio to the SBA would require an act of Congress.
The Higher Education Act of 1965 designates the Education Department's Federal Student Aid office as responsible for the debt.
Critics also noted the Trump administration's announcement in March that the SBA's workforce would be reduced by 43%. This raised questions about the agency's capacity to manage the additional responsibility of the student loan portfolio.
Judge Myong J. Joun of U.S. District Court for the District of Massachusetts issued the preliminary injunction on May 22. The injunction blocked the Trump administration from carrying out the directive to transfer management of federal student loans and special education functions out of the Department of Education.
Trump had announced the plan to transfer the student loan portfolio on March 21. He stated that the SBA was prepared for the transition.
\"They're all set for it,\" the president said of the SBA at the time. \"They're waiting for it.\"
Madi Biedermann, deputy assistant secretary for communications at the Education Department, criticized the judge's decision. She described it as an overreach based on a complaint from biased plaintiffs.
\"Once again, a far-left Judge has dramatically overstepped his authority, based on a complaint from biased plaintiffs, and issued an injunction against the obviously lawful efforts to make the Department of Education more efficient and functional for the American people,\" Biedermann wrote in a statement to CNBC on Thursday.
The Trump administration requested a stay pending an appeal of the decision.
Sarah Sattelmeyer, a project director at New America and senior advisor under the Biden administration, viewed the decision as positive for borrowers. She argued that transferring the loans would have created confusion and reduced the effectiveness of programs designed to help students access education.
\"Instead of increasing efficiency, the movement of the Department's core functions would have increased confusion and decreased the effectiveness of programs that students depend on to access education,\" Sattelmeyer said.
Consumer advocates had expressed concerns that transferring accounts between federal agencies could lead to errors and compromise borrowers' privacy. They noted that similar problems had occurred during smaller transfers between loan servicers.
Advocates also raised concerns about the potential impact on borrower protections and programs like Public Service Loan Forgiveness.
Higher education expert Mark Kantrowitz pointed out the SBA's lack of experience in managing federal student loans. He added that moving the loan portfolio to the SBA would require an act of Congress.
The Higher Education Act of 1965 designates the Education Department's Federal Student Aid office as responsible for the debt.
Critics also noted the Trump administration's announcement in March that the SBA's workforce would be reduced by 43%. This raised questions about the agency's capacity to manage the additional responsibility of the student loan portfolio.