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The Treasury Department has begun seizing the accounts of defaulted student loan borrowers.
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It is said that Ministry of Education employees will be sent to the Ministry of Finance to assist with the transition.
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The agency did not provide a timeline for when it would formally take over management of the accounts.
The Trump administration is beginning the complex process of moving millions of student loan borrowers to a new institution.
The Treasury Department confirmed in an April letter to Sen. Elizabeth Warren released on Monday that it had begun preparations to take over the Department of Education’s 9 million delinquent student loan accounts.
This confirmation follows an announcement in March that the transfer of student loan accounts to the Treasury Department would occur in phases, starting with defaulted accounts, with the goal of eventually transferring the rest of the federal portfolio to the agency.
Treasury Assistant Secretary Mason Champion wrote in the letter that the transfer has “achieved two important milestones” so far, the first of which is requiring stakeholders to provide information about purchasing agents to help defaulting borrowers choose to return to good standing.
The second “milestone” was the agreement between Treasury and the Department of Education to send seven Department of Education staff to Treasury and two Department of Education staff to the Department of Education, which Champion said would “support the delivery of the partnership, with an initial focus on transferring operational responsibility for defaulted portfolios to Treasury”.
The letter did not specify a timetable for each phase, including when management of defaulted portfolios would be formally transferred to the Treasury Department. Warren said in a statement that the agreement is “bad for students and families and I will do everything I can to fight back,” adding that the department has not yet provided evidence that the transfer will improve outcomes for borrowers.
“Treasury is fully capable of providing operational support to the Department of Education’s ongoing efforts to enhance the administration of federal student aid programs,” the Department of Education wrote in a letter to Warren accompanying the Treasury Department’s letter.
Transferring the student loan portfolio to the Treasury is part of the government’s wider aim to dismantle the Department of Education. Former officials previously told Business Insider that moving student loans to the Treasury Department could exacerbate confusion for borrowers and servicers; Arne Duncan, former education secretary under President Barack Obama, said the move “makes no sense from an education perspective or from a customer service perspective.”
Additionally, the Department of Education suspended involuntary collections on delinquent student loans in January, meaning borrowers are not facing wage garnishments or having their federal benefits withheld. While the department has not said when the moratorium will be lifted, borrowers may need additional help preparing for repayments, and moving their accounts to a new institution could jeopardize those efforts.
“Having a system spread across multiple institutions does put the entire system at risk and makes it more difficult, not only to communicate with borrowers but also to make sure that we’re moving toward a more streamlined system,” said Sarah Suttlemyer, director of the Education Project for a New America, a left-leaning think tank.
Read the original article on Business Insider
