The Treasury Department will assume operational responsibility for the Education Department’s portfolio of defaulted student loans, marking the first formal phase of a multi-step transfer announced this week. The agreement, led publicly by Treasury Secretary Scott Bessent, hands management of roughly $180 billion in defaulted loans to Treasury while signaling an eventual move of broader loan operations out of the Education Department. Under the phased plan, Treasury will begin by taking over collections and related functions for defaulted borrowers; subsequent phases would expand Treasury’s operational role over non-defaulted loans “to the extent practicable.” Administration officials cast the shift as an efficiency measure; critics warn it could create borrower confusion and legal challenges because federal law historically charged the Education Department with loan oversight. Universities, servicers and borrower advocates are watching practical handoffs—servicer contracts, borrower communications and IT integrations—that will determine whether the change disrupts repayment, income-driven plans or borrower protections. The move comes amid broader administration plans to reassign more Education Department programs and to pare the agency’s role in federal higher education policy.