Anyone who thought that President Trump and Education Department Secretary Betsy DeVos were bluffing over their threat to end the Public Service Loan Forgiveness Program needs to put that idea out of their head, because there’s no longer any doubt about their sincerity.
The Trump Administration just doubled-down on their crazy ideas for reforming Federal student loans policy, and now appear to be not only gunning for PSLF, but also on dismantling the entire framework of the Federal Student Loan system.
How’d we find out about this plan? The same way we find out about everything these days; another leak. A leaked resignation memo from James Runcie explains that Betsy DeVos plans to restructure the whole Federal Student Loans system by moving responsibility for the loans out of the Department of Education, and giving that responsibility to the Department of Treasury.
But the scariest part about this whole thing is that I think I’ve finally figured out why they’re attacking PSLF, and why they’re suggesting dismantling the power of the Department of Education. I think we’re about to see the unfolding of a massive conspiracy to steal billions of dollars in student loan processing and servicing fees, but I’ll get into that a little later.
First, let’s go through what the Department of Education appears intent on doing.
Who’s James Runcie?
James Runcie was quite literally the guy in charge of the entire Federal student aid program, and Mr. Runcie had been in this position since 2011 (he was an Obama appointment).
This is one of the people who helped lead the charge with the Obama student loan forgiveness reforms, making him a true insider, a seasoned politico, and one of the good guys working to provide effective Federal student loan debt forgiveness benefits to millions of Americans.
He was slated to hold this position until 2020, but after significant disagreements with both the Trump Administration officials and Betsy DeVos (his boss), he obviously decided that there was little left for him to do in this role.
Runcie was quite clear about his disdain for this proposal, writing about it that “This is just another example of a project that may provide some value but will certainly divert critical resources and increase operational risk in an increasingly challenging environment.”
To have the literal leader of the Federal student loan relief program resign in such a manner, during such an important time, is not only shocking, but also extremely ominous, and my mind is beginning to entertain all sorts of conspiracy theories about what Trump and DeVos are truly up to here.
What Does This Move Signal?
First off, combined with the Trump Administration’s budget, which halves the funding for the Department of Education, it’s become quite obvious that Trump himself is not at all a fan of the Department.
My read is that Trump and the Republicans were not just talking when they said they wanted to destroy several US Departments, including the Department of Education, and that they’re now actively trying to dismantle DOE entirely.
Trump had literally called for getting rid of the Department entirely in the past, but most people thought he was just being Trump.
I don’t feel that way at all, and after checking out his book “Crippled America”, and reading his assertion that the Department of Education should be either eliminated entirely, or at the very least have “its power and reach” reduced, I’m thinking that he’s pretty serious about this stuff.
For whatever reason, people have disregarded his comments entirely, likening them to previous times when other Republican lawmakers made their own similar threats (like during the Reagan administration), but in my opinion, we’re seeing something entirely different here.
Hopefully, if there’s one good thing to come from Trump and DeVos’s plan, this announcement will help wake ordinary Americans up to the fact that we’ve got a war on our hands, and that Trump’s Administration is deadly serious about all the plans they have for shutting down Government agencies and services.
Perhaps this will be the straw that breaks the camel’s back, and Americans will begin taking these threats seriously and start doing something about them. I know it’s woken me up.
What Would Change?
If Federal student loans are removed from the Department of Education and handed to Treasury, then you can expect quite a few things to change, including the way that these loans are distributed and serviced.
First, let’s talk about how big the Education Department’s Federal student loan program actually is; there is currently $1.4 TRILLION in outstanding Federal student loans, which written out fully, looks like this: $1,400,000,000,000.
Just so we’re all aware, this is what $1 Trillion dollars actually looks like.
Those are stacks of $100 dollar bills, by the way, not $1s.
And that $1.4 Trillion Dollar number makes Federal student loan debt one of the biggest monetary values on the planet, which also means that any changes made to the way this debt is handled can lead to massive, extremely significant financial repercussions for the entire global economy.
And that’s the part of the proposal that scares me the most, because the Trump Administration’s track record hasn’t been very good for virtually anything they’ve attempted thus far.
What if they screw this up to? What if they screw this up on purpose? That’s what I think is actually going on here, and in just a minute, I’ll get into why I think that.
Does Anyone Like This Plan?
But before I explain why I think President Trump and Betsy DeVos are about to purposefully pop the student loan debt bubble, let me make it clear that I could be totally wrong, and that there have been other people in the past who’ve advocated for doing the very thing they’re now proposing.
It wouldn’t be fair for me to make it seem like ONLY the Trump Administration is in favor of moving the student loan responsibilities away from the Department of Education, because that’d be entirely disingenuous; in reality, even some Obama Administration officials were in favor of transferring these loans to the Treasury Department, and for some very good reasons too.
Rohit Chopra, who works at the Consumer Financial Protection Bureau now, and who once served as a Student Loan Ombudsman (he’s one of the good guys folks), has provided support for the move, and his logic seems pretty sound to me: “The Education Department is a policy shop with a trillion-dollar bank on the side”.
Why would we combine those two very different missions in a single Department? My opinion? Because that’s how Government works: it’s messy, complicated, and oftentimes, highly inefficient.
There’s almost always a better way to handle everything that the Federal Government does, but in this case, what they’re doing is kind of working, and risking blowing all that up doesn’t seem worth the risk to me.
But I’m not the expert, and to Mr. Chopra’s point, combining education policy and banking really doesn’t sound like the best way to build an effective Federal Department, because people who understand student loans and higher education needs don’t necessarily get banking or finance, and vice versa.
However, I do sincerely hope (and believe?) that the Department of Education has enough experts from each field to handle their mission, and again, I think that moving all this under the Trump Administration, who has proven to be ineffective at virtually everything, is a bad idea.
Are There Benefits To The Plan?
There definitely would be some benefits to allowing the Treasury Department to handle student loans, especially on the processing side of things, since it’s currently not easy to apply for Federal student assistance, nor is it easy to maintain those loans once they’ve been established.
Currently, filling out the FAFSA paperwork is quite a chore, and that’s almost entirely because the Department of Education doesn’t have an easy way to look up details about individual Americans applying for benefits.
If the student loan stuff were sent to Treasury, they might be able to interface directly with the IRS information instead of using the existing process, which requires people to manually get their info from the IRS, then enter it manually with the DOE.
Streamlining this process alone would likely save million of Americans significant time and stress, making it far easier to apply for Federal student aid.
Also, on the servicing side of Federal student loans, we’d probably see further improvements and greater efficiency as well.
Why? Because once again, IRS data has to be pulled out of their system, then reported to the DOE, instead of allowing it to all be integrated in a single system, which would definitely make it easier to do things like re-certify employment, salary and tax information each year (which is currently required for anyone enrolled in the the Income-Based Federal Student Loan Repayment Plans, like Pay As You Earn and REPAYE).
To put it quite clearly, here’s a quote from James Kvall, former deputy under secretary of education during the Obama reign: “Because the Education Department and the I.R.S. are separated, we’ve built these clunky systems that get in the way of achieving the goals of the income-based programs. Linking the two would be much easier for students, and have stronger integrity for taxpayers.”
I definitely agree with Mr. Kvall’s point here, because I’m constantly inundated with questions about these parts of the student loan debt process; verifying employment and income isn’t easy, and streamlining the system sounds like a great idea.
I also do think that borrowers would generally benefit from a simplification of this system, since it’s one of the most complicated, confusing and time-consuming processes on the planet, but I’m still extremely concerned about what could go wrong should this thing get screwed up, and I’m even more concerned that they may be planning to screw the transfer up on purpose (keep reading to find out why!).
What Are the Downsides to the Plan?
Perhaps, as Mr. Chopra and Mr. Kvall above suggest, there’d be big wins for borrowers if we separated the the Federal student loan policy pieces from the logistical, implementation and processing responsibilities, but personally, I simply don’t trust the Trump Administration to get this done right.
In fact, I’m not even sure what the Trump Administration plans on doing at all, because there’s a nagging voice in the back of my mind that’s screaming “Don’t let them get away with this!”.
Get away with what? Destroying the entire Federal student loan system… on purpose.
Now, my friends already call me a Conspiracy Theorist, and for good reason, but I’ve kept my conspiracy thoughts away from this site for the entire five years that I’ve been running it.
I can’t do that any longer, because I see this plan as a direct threat to the American taxpayer. I do not think that President Trump and Betsy DeVos have our best interests in mind here, and I think they may be plotting to unravel a system that’s generated a significant benefit for millions of Americans, all to enrich themselves.
In fact, I see all sorts of reasons why both President Trump and Betsy DeVos might want to turn this whole thing into a complete disaster, and I think they’d both personally benefit from the current Federal student loan system collapsing, so I’m hesitant to recommend that any of us promote or encourage this transition, because if it were to go wrong, there’d likely be disastrous consequences.
What If…
Conspiracy Theory alert. If you aren’t interested in this sort of stuff, turn back now, because we’re about to enter the waters of complete speculation…
What if this whole plan is simply a head-fake?
What if the Trump Administration is using the proposal to kill PSLF to distract from this new plan to move the entire Federal student loan system to the Treasury Department (which we only heard about via leaks)?
What if even this plan is a false narrative, because the true plan is to bungle the transfer process between the Department of Education and the Treasury Department so badly that the whole system has to be scrapped, and rebuilt from scratch?
What if their plan is to outsource that process, and hand over managing the entire $1.3 Trillion in Federal student loan debt to a private agency who they claim will do a better job than the Federal Government?
And what if Betsy DeVos were personally connected via family business relationships to financial servicing organizations (literally to student loan debt collection agencies) that stand to make BILLIONS of dollars working on that $1.3 TRILLION dollars in outstanding Federal student loan debt?
If this were all true, and this is a big conspiracy to cash-in on taxpayer dollars, then this would be not just the largest attempt to fleece dollars from American Taxpayers, but quite literally the largest theft of all time.
Would you put that past Trump?
Would you put that past Betsy DeVos?
I wouldn’t, and that’s why I’m so damn concerned about this proposal.
I think we need to fight this thing tooth and claw because I do not want to see our Federal student loan system destroyed in the name of greed, and I doubt that most Americans do either.
If you feel the same way I do, please make sure to share a link to this article with everyone you think would be interested in it.
I’m currently brainstorming options for organizing resistance to this plan, like I’ve already done with my Petition to Protect PSLF.
The truth is that none of us really what President Trump’s plan to reform student loan debt policy will actually look like, because all we’ve heard so far is talk of the potential proposals, but I’m quite concerned that we’re about to see the entire Federal student loan system unravel, and I think you should be too.
By: Tim Marshall
Tim's experience struggling with crushing student loan debt led him to create the website Forget Student Loan Debt in 2011, where he offers advice, tips and tricks for paying off student loans as quickly and affordably as possible.