U.S. President Donald Trump poses with U.S. Secretary of Education Linda McMahon after signing an executive order to shut down the Department of Education, during an event in the East Room at the White House in Washington, D.C., U.S., March 20, 2025.
President Donald Trump has officially moved to dismantle the Department of Education, but said federal funding for core programs, including Pell Grants and student financial aid, will be unaffected.
The president cannot unilaterally abolish a federal agency without the approval of Congress. However, in the executive order signed Thursday, he instructed Secretary of Education Linda McMahon "to the maximum extent appropriate and permitted by law, take all necessary steps to facilitate the closure of the Department of Education."
It's unclear how the order will be carried out and whether Congress will support the president's agenda.
When it comes to federal financial aid, "consistent with the Department of Education's authorities, the Secretary of Education shall ensure that the allocation of any Federal Department of Education funds is subject to rigorous compliance with Federal law and Administration policy," the order states.
We've got the news you need to know to start your day. Sign up for the First & 4Most morning newsletter — delivered to your inbox daily. Sign up here.
However, the order also says to comply with federal policy, programs receiving funding must terminate "illegal discrimination obscured under the label 'diversity, equity, and inclusion' or similar terms and programs promoting gender ideology."
Critics of the order are skeptical that whatever remains of the Department of Education — particularly as its workforce has already been reduced by half — will be able to carry out the administrative work necessary to keep funds flowing.
"The notion that the Department can be summarily closed or functionally decimated while maintaining 'uninterrupted delivery of services, programs and benefits on which Americans rely' — as the order reportedly directs — is a pipe dream," Aaron Ament, president at advocacy nonprofit The National Student Legal Defense Network, said in a March 19 statement.
Money Report
The order comes as high school seniors wait to hear back from colleges regarding admissions decisions and financial aid. Current college students may also be awaiting decisions on their financial aid packages for the 2025-26 school year.
"Dismantling the Department in haste could cripple the government's ability to accurately distribute billions in federal student aid, putting millions of students at risk — especially low-income students who lack a financial safety net," Beth Maglione, interim president and CEO at the National Association of Student Financial Aid Administrators, said in a statement.
Student aid is safe for now, bandwidth may be an issue
Neither the executive order nor the actual act of dismantling ED abolishes existing student aid programs "as those are enshrined in statute," Maglione told CNBC Make It via email.
"Where we do have some concern, however, is bandwidth at the Department to effectively administer those programs, or troubleshoot issues with the FAFSA, for example, should any technical issues arise," she said.
The Free Application for Federal Student Aid has a history of being cumbersome for students and families in need of funding for college.
When ED made improvements to the application system last year, rolling out fixes came with a plague of delays and technical issues. Though the technical infrastructure was in better shape for the most recent application cycle, institutional changes at ED may throw the incoming aid year into disarray.
"[FAFSA] is certainly something we'll be keeping an eye on," Maglione said. "With the recent reduction in force and plans to further dismember the department, it's unclear who will oversee certain aspects of student aid administration and what plans there are, if any, for how work will be redistributed."
Student loans to fall under the Small Business Administration
On Friday, Trump began providing some clarity on the next steps for ED's functions, including moving support for students with disabilities under the Department of Health and Human Services and transferring the federal student loan portfolio to the Small Business Administration, headed by Kelly Loeffler.
"The SBA stands ready to take the lead on restoring accountability and integrity to America's student loan portfolio," Loeffler wrote in a post on X.
Meanwhile, the SBA announced it would also be reducing its workforce by over 40%.
For current borrowers, the change may not be immediately felt. The terms of their loans will stay the same and they still owe the balances even if a different agency manages them. But advocates fear SBA is not equipped to handle the $1.6 trillion debt portfolio and provide support to borrowers struggling with repayment.
"This can only result in borrowers experiencing erratic and inconsistent management of their federal student loans. Errors will prove costly to borrowers and ultimately, to taxpayers," Jessica Thompson, senior vice president of The Institute for College Access & Success, said in a statement.
Want to earn some extra money on the side? Take CNBC's new online course How to Start a Side Hustle to learn tips to get started and strategies for success from top side hustle experts. Sign up today and use coupon code EARLYBIRD for an introductory discount of 30% off $97 (+taxes and fees) through April 1, 2025.
Plus, sign up for CNBC Make It's newsletter to get tips and tricks for success at work, with money and in life.
