US Department of Education to Transfer Millions of Defaulted Student Loan Accounts to Treasury Department

The US Department of Education announced in March that it would transfer millions of federal student loan accounts to the Treasury Department. The process will start with accounts of borrowers in default. This action is part of efforts to adjust the management of federal student aid programs.

Defaults on federal student loans occur after 270 days of missed payments. Approximately 9 million borrowers are currently in default, marking a record high. The transfer aims to address management of these accounts.

Background on Prior Efforts In 2015, the Obama administration conducted a pilot program to assess the Treasury Department's ability to collect on defaulted student loans.

The program involved transferring about $80 million in defaulted loan accounts to the Treasury. A control group of similar accounts remained with private debt collection agencies. The pilot lasted one year.

5% by the private collectors. 4%. Sarah Bloom Raskin, who served as deputy treasury secretary at the time, stated that the pilot encountered operational challenges. These included difficulties in reaching borrowers and ensuring correct payment amounts.

The program sought to evaluate issues with private collection agencies.