The Treasury Department will assume operational control of roughly $180 billion in federal student loans that are in default, marking the first major step in a broader plan to move the government’s $1.7 trillion loan portfolio out of the Education Department. The transfer, announced in an interagency agreement, names Treasury officials — led publicly by Scott Bessent — to manage collections and signals a longer-term shift of loan servicing and financial aid duties to Treasury. Treasury and Education officials framed the move as an effort to impose “financial discipline” and improve collections; Treasury Secretary Scott Bessent said the department has the operational capabilities to manage defaults. Opponents, including consumer advocates and legal experts, warn the shift could cause borrower confusion, threaten privacy and legal protections tied to the Education Department, and prompt litigation over statutory authority. The agreement sets a phased approach: defaults move first, followed by non-defaulted loans and eventually FAFSA operations “to the extent practicable.” Implementation details — including servicer contracts, borrower notices, and legal challenges — will unfold in the coming months and are likely to drive uncertainty for institutions that rely on federal aid flows and for campuses supporting distressed borrowers. Higher‑education leaders and policy groups are watching for operational gaps that could affect enrollment, grant distribution, and campus financial-aid offices. The transfer also accelerates a broader administrative agenda to shrink the Education Department’s role, with potential funding and regulatory consequences for colleges and universities.