Washington gutted the office that manages your student loans. Next week, it has to reinvent them
On July 1, the biggest student loan overhaul in decades kicks in. The agency running it lost 40% of its staff and is blocking its own watchdog from seeing the damage.
Overview
Next week, how Americans fund higher education will change forever. On July 1, sweeping changes to student loan borrowing will take effect, setting lifetime caps on previously unlimited loans and limiting the options for repayment.
But, on March 11, 2025, Federal Student Aid (FSA), the office that manages student loans, was gutted by DOGE cuts, and problems have embroiled borrowers since. Student loan borrowers have reported issues with repaying their loans, including incorrectly receiving monthly payment bills as low as $50, when their actual payments were thousands of dollars. Other borrowers can’t access the Pay As You Earn repayment plan that should still be available to them, even as the Trump administration cut that option for new borrowers, CNBC reported. That plan allows people to pay 10% of their discretionary income, whereas other plans could lead to higher payments.
In 2026, nearly one in six American adults had federal student loan debt. The average federal student loan debt is $39,075, according to the Education Data Initiative. For master’s graduates, the average jumps to $81,870, and the average doctoral graduate has $180,757 in student debt.
A new report from the Education Department’s Office of Inspector General, an independent entity within the department that completes audits and identifies fraud, found that 40% of the staff that manages the $1.7 trillion student-loan portfolio were fired or left for other reasons. Of Federal Student Aid’s 136 suboffices, nearly a quarter have no remaining employees, according to the report.
The report also found that the DOGE cuts affected significant suboffices of FSA that manage lending institutions and risk assessment, leaving them with no employees. The report analyses how the office’s workforce was immediately affected by DOGE cuts during the first quarter of 2025. The suboffices that work with the schools that accept federal loans, track default rates, and colleges’ median earnings, were also left with no staff.
Less than half of the staff who monitored accurate data collection and risk assessment, managed the office’s customer website and mobile app, and provided IT support remained.
“If anything, this ‘report’ demonstrates how effective the Trump Administration is,” Ellen Keast, press secretary for higher education at the Education Department, told Fortune. “With nearly half the staff, ED has effectively implemented some of the most sweeping higher education reforms in decades while returning education to the states.”
Details
She also called the accuracy of the report into question, saying that the report does not include staffing changes since March 31, 2025. The OIG report noted that since that time, the Education Department has made agreements with other agencies to reduce the work performed under the department and announced that it was bringing back more than 200 employees who were let go in March 2025.
In the report, the OIG said that the Department did not provide all requested information or provide unfettered access to staff, which limited the analysis.
“Although the Department has repeatedly cited concerns about ongoing judicial proceedings and court orders, it has not explained how granting us access to requested documents and to staff would place it at risk of noncompliance with those proceedings and court orders,” the report’s authors. “Further, no corroborating evidence has been provided by the Department to support its assertion that it has continued to discharge the responsibilities referenced in the report since the RIF.”
By March 31, 2025, only 861 of FSA’s 1,446 employees remained, according to OIG, which did not differentiate between full-time and part-time employees. By April 2026, the agency had 731 full-time staff, according to NPR.
Recently, FSA has been on a hiring spree. The office had 731 full-time staff in April and planned to hire an additional 334 full-time employees by 2027, Politico reported. More than 50 new employees have joined the organization since September, but the new target will be a third smaller than the 1,568 staffers during the Biden administration.
This story was originally featured on Fortune.com
Source
Originally published at fortune.com.
