In a surprise move that has sent shockwaves through the education sector, the Small Business Administration (SBA) announced it will reduce its workforce by 43%, eliminating 2,700 jobs. This cut comes as the agency is poised to take over a staggering $1.6 trillion student loan portfolio from the Department of Education, a shift implemented by President Donald Trump as part of his administration’s goal to eliminate the education department altogether.
On March 22, 2025, SBA Administrator Kelly Loeffler confirmed the drastic employment cuts, attributing them to the efficiency mandates from Elon Musk’s new Department of Efficiency. In her remarks, Loeffler stated, “We are prepared to work with Congress and the Administration to bring accountability back to America’s student loan program.”
But this pivot has thrown millions of student loan borrowers into uncertainty. Almost immediately after signing an executive order aimed at dismantling the Department of Education, Trump announced that all student loans would now be handled by the SBA. Critics have raised alarms, asserting that this could lead to chaos for the 40 million borrowers nationwide.
“Dismantling the Department of Education will make things much worse, creating new disruptions and costly and frustrating problems for students, borrowers, and their families in every state,” warned Abby Shafroth, co-director of advocacy at the National Consumer Law Center in a statement regarding the changes.
Educational advocates, including the Student Debt Crisis Center, have labeled the administration’s approach an “unprecedented attack” on the rights of millions of families and students, indicating that the move adds layers of confusion and hardship for borrowers. Natalia Abrams, the center’s president, emphasized the risks, stating, “Without the Department of Education, borrowers will be left without recourse... vulnerable to exploitation, and cut off from any meaningful path to relief.”
Education Secretary Linda McMahon noted that she is collaborating with Loeffler on a strategic plan for transitioning the student-loan accounts, but details remain sparse. “We’ve talked also with Treasury, and how they can be interactive in that process,” McMahon told Fox News, as uncertainty hung in the air regarding how these changes would empower the SBA amid a significant reduction in staff.
Many student-loan borrowers remain in limbo while awaiting decisions that affect their repayment plans, especially those enrolled in the SAVE plan, which promises reduced payments and is currently embroiled in legal challenges. Trump’s executive order also aims to narrow the Public Service Loan Forgiveness program, which forgives debt for government and nonprofit workers after a decade of payments.
Legal experts assert that Trump cannot legally eliminate the Department of Education or transfer student loans away from it without congressional approval. The Higher Education Act of 1965 states that the education secretary “shall maintain responsibility” for federal student aid programs. Furthermore, Sen. Bill Cassidy, chair of the Senate education committee, has expressed intent to introduce legislation to facilitate the closure of the department, which raises eyebrows over the legality of such actions.
As advocacy groups prepare a lawsuit scheduled for filing on March 24, 2025, the landscape remains fraught with tension. “Donald Trump’s own Secretary of Education has acknowledged they can’t legally shut down the Department of Education without Congress,” asserted Aaron Ament, president of Student Defense. “Yet that is, for all intents and purposes, exactly what they are doing.”
With critics likening the ongoing restructuring of the Department of Education to poorly run service at a notoriously understaffed restaurant, fears linger about the potential fallout. Jared Bass of the Center for American Progress remarked, “Wait times are long; you may get the wrong order, the service is just bad.”
As the SBA prepares itself to handle the formidable task of managing student loans, many wonder if it can effectively navigate the complexities of such an expansive portfolio with a significantly reduced workforce. “As the government’s largest guarantor of business loans, the SBA stands ready to deploy its resources and expertise on behalf of America’s taxpayers and students,” stated Loeffler, though skepticism remains dominant among stakeholders.
The fate of student-loan borrowers seems precarious amidst this upheaval. Many advocates fear that the restructurings will result in costly errors for students already reeling from financial burdens. “Erratic and inconsistent management of their federal student loans could prove costly to borrowers and ultimately to taxpayers,” warned Jessica Thompson, senior vice president of The Institute of College Access & Success.
As developments unfold in this high-stakes scenario, all eyes will remain on the federal administration’s next moves concerning education reform and the handling of student loans. The potential disruption to millions could underline the necessity of robust oversight as the SBA forges ahead in its new, challenging role amid government cuts and a looming legal battle.
