The U.S. Treasury Department will now oversee collections on defaulted federal student loans, following a March 19 announcement by the Department of Education. The transition occurs in three phases, beginning with recovery of delinquent debt through private collection agencies.
Treasury Secretary Scott Bessent said the move leverages Treasury’s financial expertise to improve efficiency and reduce taxpayer costs. “Treasury has the unique experience... to bring long overdue financial discipline to the program,” he stated.
Of the 42.8 million federal student loan borrowers owing $1.7 trillion, roughly 7.7 million-carrying $180 billion-are in default. Another 4 million are nearing default, according to Federal Student Aid data from December 2025.
Borrowers in repayment should continue working with their current servicers. Those in default are directed to myeddebt.gov for rehabilitation options.
Critics warn the shift could harm vulnerable borrowers. Aissa Canchola Bañez of Protect Borrowers Policy argues Treasury lacks expertise in borrower rights under the Higher Education Act and may deepen confusion.
Supporters, including Cato Institute’s Andrew Gillen, point to Treasury’s existing role in disbursing aid, verifying income, and running the Treasury Offset Program-which seizes tax refunds and benefits from defaulted borrowers-as evidence of capability.
A prior pilot project from 2014-15, however, showed Treasury’s collection efforts underperformed compared to Education Department systems.