Yes, the US government does have a student loan agency: the Federal Student Aid (FSA). FSA is an office within the U.S. Department of Education and is responsible for administering various federal student aid programs, including loans. They oversee and manage a large federal student loan portfolio, providing billions of dollars in loans to students.
The U.S. federal government
took over student lending in 2010 by eliminating the Federal Family Education
Loan Program (FFELP) and transitioning all new federal student loans to the
Direct Loan Program. This switch, enacted through the Health Care and
Education Reconciliation Act, ensured that the government directly lent to
students, rather than through private lenders.
https://www.google.com/search?q=what+year+did+the+us+federal+government+take+over+student+loans&
How Trump’s Spending Bill
Could Impact Student Loans—Including Higher Payments And More Restrictions
By Alison Durkee, Forbes Staff. May 23, 2025.
President Donald Trump’s sweeping domestic policy bill, which goes to the Senate now after passing the House, proposes a major overhaul of student loan programs and repayment plans in order to fund the bill’s tax cuts—with critics saying it could force some toward taking out private loans and increase monthly payments for others.
The domestic policy
bill—referred to as the president’s “One Big Beautiful Bill”—passed the
House in a 215-214 vote Thursday, and will now be debated in the Senate, where
further changes could be made.
It would extend the 2017 tax
cuts passed in Trump’s first term and direct billions of dollars toward major
priorities of the president’s policy agenda, like renewing funding for a border
wall between the U.S. and Mexico.
As a way to offset its tax cuts and Trump-friendly spending, the bill also includes controversial cuts to Medicaid and food assistance—and broadly overhauls federal student loan programs, affecting both people who take out loans and those still paying off loans.
The version of the bill passed by the House abolishes most loan repayment plans and only gives borrowers—including current borrowers—two options for paying their loans off, either through a standard repayment plan (paying the same amount every month) or a new plan based on annual income. It also imposes limits and restrictions on new loans and Pell Grants.
Student borrower advocates have strongly decried the bill’s provisions, with the Student Borrower Protection Center (SBPC) projecting it would disqualify many borrowers who now receive Pell Grants, force more borrowers to take out private loans due to the new federal limits, and increase monthly payments for many existing borrowers who are paying down their loans.
The bill proposes changing the formula for how much the federal government grants borrowers. Loans would now be calculated based on the median cost of all similar college programs, rather than the cost to attend the specific school or program the student is attending. (It is unclear how that number will be calculated.) That means students attending higher-priced schools will receive less money, because the rate will take into account other schools that are less expensive.
The bill places new caps on the amount of federal student loans that both parents and students can take out, limiting it to $50,000 in total undergraduate loans that a student can take out and $100,000 or $150,000 for graduate and professional programs, based on the type of program. Parents are also limited to only taking out $50,000 total in federal loans to pay for their children’s education, which applies even if parents are taking out loans for multiple children. Students and their parents cannot borrow more than $200,000 in total—including both undergraduate and graduate loans—under the bill, with those limits set to take effect in July 2026.
Lawmakers propose limiting some federal loans, including restricting graduate students and parents from receiving Federal Direct PLUS Loans starting in July 2026.
If passed, the bill would abolish most of the current options that borrowers have to repay their student loans, instead giving borrowers—including those who have already been paying off loans—the choice of only a standard repayment plan or a new Repayment Assistance Plan (RAP) based on annual income. The standard repayment plan means borrowers will pay back their loan at a fixed rate each month. Loans of up to $25,000 will be paid over the course of 10 years, loans of up to $50,000 will be paid over 15 years, loans of up to $100,000 will be paid over 20 years and loans over that amount will be spread out over 25 years. RAP replaces existing income-driven repayment plans, but still allows borrowers to make their monthly payments based on income. Borrowers pay rates based on their annual income, which range from $120 per year for those making less than $10,000 (divided up into $10 monthly payments) to 10% of gross annual income for those making over $100,000. Unlike previous income-based plans, RAP allows borrowers’ remaining loans to be forgiven after 30 years of making payments—up from 20 or 25 years under current plans—and has a minimum payment of $10 each month, while low-income borrowers can now qualify for $0 repayments.
Trump’s policy bill gets rid of current rules that allow borrowers to temporarily have their loan payments deferred due to unemployment or economic hardship, which will apply to borrowers who take out loans starting in July 2025. It also places new limits on forbearance—a temporary pause on loan payments—which states loans can’t be in forbearance for more than 9 months during any 24-month period. The bill does help borrowers by allowing them to now rehabilitate their loans twice, rather than once. That refers to when borrowers can get out of being in default on their loans by making a certain number of on-time payments under a rehabilitation agreement.
The new provisions on loan repayments will apply to all borrowers who are still repaying their debt, though existing borrowers can still defer payments due to economic hardship, and count those months in which payments were deferred toward their 30 years of payments before loans are forgiven. The bill text states RAP would take effect on July 1, 2026, though it also directs the Secretary of Education to start transitioning to the new payment policies within nine months of the bill being enacted into law.
The restrictions on new federal student loans could force more students and parents to turn to private lenders, which currently make up less than 10% of all student loans issued. Private loans have many disadvantages as compared with federal ones, as they typically have higher interest rates, are not eligible for income-based repayment plans and don’t offer forgiveness programs. Medical experts have also warned the $150,000 cap on loans for professional schools could further exacerbate the U.S.’s doctor shortage by making it more expensive for students to attend medical school. When it comes to paying off loans, SBPC projects RAP will broadly increase borrowers’ payments as compared with previous Biden-era income-based payment plans designed to help borrowers make lower payments. The average borrower with a college degree will pay $2,928 more per year than under the Biden-era SAVE plan, SBPC estimates, and the bill also means borrowers will spend longer paying off their loans than they would under current rules.
The policy bill states students can’t receive Pell Grants if they’re enrolled in school less than half time and raises the necessary number of credits taken per year from 24 to 30. It also disqualifies students from Pell Grants if their student aid index—a number demonstrating a student’s financial need, based on their families’ financial resources and expenses—is at least twice the maximum Pell Grant given that year. These changes could mean more than 61% of recipients could lose their grants or have them reduced, according to SBPC, noting that it will affect many low-income students who are attending school in their spare time, and families that might have a high aid index, but have higher expenses from putting multiple children through school. The bill also establishes a new Pell Grant program for short workforce training programs, which must be less than 15 weeks long and either lead to a postsecondary certification or is recognized by a state’s governor as aligning with a “high-skill, high-wage” or “in-demand” job or industry
Big Number
42.5 million. That’s the number of borrowers with outstanding federal student loan debt as of the second quarter of 2025, according to the Department of Education.
Key Background
Student loan debt has become a key political issue over the past few years, as Democrats have fought for loan forgiveness and the Biden administration sought to provide sweeping debt relief, only to have Republicans challenge it in court and the Supreme Court strike it down. While the Biden administration still made numerous piecemeal moves to forgive Americans’ debt, the Trump administration has not followed suit, with Education Secretary Linda McMahon saying in April that “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.” Trump has ordered the student loan portfolio to move under the Small Business Administration as he seeks to abolish the Department of Education, and he has also sought to restrict loan forgiveness for public servants so that it excludes employees working at organizations that are opposed to his policy agenda. Most notably, the Trump administration resumed debt collections May 5 for borrowers who have defaulted on their student loans, after collections had previously been on pause since the COVID-19 pandemic. The move is expected to impact millions of borrowers who haven’t paid their loans for approximately nine months, and the Trump administration intends to garnish a portion of workers’ wages if their loans remain unpaid.
In 2025, the total student loan debt in the US is estimated to be around $1.77 trillion, held by roughly 42.7 million borrowers.
Here's a breakdown of key student loan balance statistics:
Overall Debt:
Total student loan
debt: $1.77 trillion, making it the second-largest consumer debt category
after mortgages.
Average debt per
borrower: $38,883.
Average debt for bachelor's
degree recipients: $29,300.
Average household debt: $55,777.
Federal Student Loan Debt:
Total federal student loan
debt: $1.64 trillion.
Average federal student loan
debt: $38,375.
Number of federal student loan borrowers: 42.7 million.
Private Student Loan Debt:
Total private student loan
debt: $134.19 billion.
Percentage of total student loan debt: Roughly 7.6%.
Factors Contributing to High
Student Loan Debt:
Rising cost of education: Tuition and fees have steadily increased over the past two decades, forcing students to borrow more to finance their education.
Interest accrual: For unsubsidized loans, interest accumulates while the borrower is in school, adding to the overall debt burden.
Borrowing for graduate and professional degrees: Graduate students, particularly those pursuing professional degrees, tend to accrue significantly higher debt levels.
Challenges and Considerations:
Student loan delinquency and default: Millions of borrowers are struggling to repay their loans, leading to rising delinquency and default rates.
Impact on credit scores: Missed or late payments can negatively affect credit scores, limiting access to other forms of credit.
Economic impact: High levels of student loan debt can hinder borrowers' ability to save, invest, and contribute to the overall economy.
The average federal student loan debt held as of March 2025 is $39,075. Black Americans hold an average (median) of $26,000 in student loan debt, while white Americans have $25,000. Sixteen percent of Americans with student loans are behind on their payments.
https://www.google.com/search?q=us+student+loan+balance+2025
In 2025, interest rates for federal student loans are fixed and vary depending on the loan type and the borrower's status (undergraduate, graduate, or parent). Here's a breakdown of the interest rates for the 2024-2025 academic year:
Federal Student Loan Interest
Rates (2024-2025):
Direct Subsidized Loans
(Undergraduate): 6.53%
Direct Unsubsidized Loans (Undergraduate): 6.53%
Direct Unsubsidized Loans
(Graduate or Professional): 8.08%
Direct PLUS Loans (Parents and
Graduate/Professional Students): 9.08%
Important points to consider about federal student loan interest rates:
Fixed Rates: All federal student loans disbursed since July 1, 2006, have fixed interest rates, meaning the rate stays the same for the life of the loan.
Annual Adjustment: The interest rates for federal student loans are set annually by the U.S. Department of Education, typically based on the 10-year Treasury note auction in May, plus a fixed add-on percentage.
Slight Decrease Expected for 2025-2026: Based on the May 2025 Treasury auction, some experts anticipate a slight decrease in federal student loan interest rates for the 2025-2026 academic year.
Private Student Loans:
Variable Rates: Private student loans often have variable interest rates, which can fluctuate over time based on market conditions.
Credit-Based Rates: Private lenders determine interest rates based on factors like credit score, income, and the chosen loan term.
Potentially Higher
Rates: Private student loan interest rates can be higher than federal loan
rates, especially for borrowers with lower credit scores.
https://www.google.com/search?q=us+student+loan+interest+rates+2025
Changes in 2025: While there were proposals to move the administration of federal student loans from the Department of Education to another agency (like the Small Business Administration or the Treasury Department), these changes did not directly impact Sallie Mae's (Aidvantage) role. The focus was on how the federal government would manage the student loan portfolio, not on the role of private lenders like Sallie Mae.
Executive Order and Dismantling the DOE: President Trump did sign an executive order to dismantle the Department of Education and propose moving federal student loan administration to other agencies, but this proposal did not directly involve Sallie Mae. According to an article from NPR, the student loan portfolio was slated to move to the Small Business Administration.
Sallie Mae's Focus: Sallie
Mae's current focus is on private student lending and college planning
resources. According
to Seeking Alpha, they are seen as a leader in private student
lending.
https://www.google.com/search?q=was+sallie+mae+moved+from+the+US+DOE+2025
Comments
Student loans should be granted to “credit-worthy” applicants to fund their “professional” education that will enable them to pay back their loans on schedule. This includes students to Medical School, Dental School and Engineering School.
Norb Leahy, Dunwoody GA Tea Party Leader
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