HR-9609-119
Ordered to be Reported (Amended) by the Yeas and Nays: 19 - 16.
Sponsored by Tim Walberg (R-MI)
What it does
This bill would transfer all federal student loan and student aid functions — including loan servicing, collections, repayment plan administration, Pell Grants, Federal Work-Study, and need analysis — from the Department of Education to the Department of Treasury. The transfer would occur in three sequential phases, with effective dates jointly determined by the two Secretaries. The bill also would end a longstanding exemption that allowed student loan debt to be excluded from standard federal debt collection procedures under the Debt Collection Improvement Act.
Who benefits
Borrowers who supporters argue would benefit from Treasury's existing debt-management infrastructure and IRS income data integration. Taxpayers broadly, if consolidation reduces administrative overhead. Treasury Department, which would gain a large new portfolio and associated personnel and resources. The Office of Management and Budget, which gains significant authority to determine how functions and personnel are allocated during the transition. Private debt collection agencies, which may gain more business as the student loan exemption from the Debt Collection Improvement Act is removed. Institutions that prefer a single federal financial agency managing both tax and loan data.
Who is hurt
Current Department of Education employees whose jobs may be eliminated or significantly restructured, despite the bill's no-net-increase requirement. Borrowers who may experience service disruptions during a complex multi-phase transition between agencies. Colleges and universities that must adapt compliance and reporting relationships to a new federal agency. Borrowers in default who would lose the student loan exemption from standard debt collection procedures, potentially exposing them to more aggressive collection tools. Advocacy organizations and legal aid groups that have built expertise navigating Education Department processes and would need to reorient. States and institutions that have established relationships and procedures with the Education Department's Federal Student Aid office.
Supporters argue
Supporters argue that the Treasury Department already manages the federal government's debt portfolio and has direct access to IRS income data, making it structurally better suited to administer income-driven repayment plans and collections than the Education Department. They contend that consolidating these functions eliminates duplicative bureaucracy — the Federal Student Aid office alone employs thousands and has faced repeated Inspector General criticism for mismanagement and contractor oversight failures. Supporters further argue that ending the student loan exemption from the Debt Collection Improvement Act brings student debt in line with all other federal debt, creating a more consistent and accountable collection framework.
Opponents argue
Opponents argue that transferring the entire federal student aid apparatus — covering over 43 million borrowers and more than $1.7 trillion in outstanding debt — to an agency with no experience administering education programs risks catastrophic service disruptions during the transition. They contend that Treasury's mission is tax collection and fiscal management, not student welfare, and that embedding student aid in a revenue-focused agency could subordinate borrower protections to debt recovery priorities. Opponents further argue that removing the student loan exemption from the Debt Collection Improvement Act could expose struggling borrowers to harsher collection tools without the education-specific due process protections currently in place.
Constitutional context
The federal student loan and aid programs operate under Congress's Spending Clause authority (Art. I, §8, cl. 1), and the conditions attached to those programs have been upheld under the South Dakota v. Dole (1987) five-part test. This bill reorganizes which executive agency administers those programs — a structural question that implicates the President's and Congress's shared authority over executive branch organization, but does not raise a novel enumerated-powers question. No active constitutional tension area is directly triggered.
Checks and balances
The Executive Branch — specifically the Treasury Department and OMB — gains significant new administrative authority over student aid; Congress retains oversight through required OMB certification reports to the House Education and Workforce Committee and the Senate HELP Committee, and existing judicial review of agency actions is preserved.
Historical precedent
The Department of Education Organization Act of 1979 created the Education Department by transferring education functions from the Department of Health, Education, and Welfare — a comparable large-scale reorganization of federal education administration, though in the opposite direction.