WASHINGTON, D.C. — The U.S. Education Department handed off a portion of its student loan portfolio to the Treasury Department on Thursday. Under the interagency agreement, the Treasury Department will take over management of student loans whose borrowers are in default.

Federal student loans in default total about $180 billion, which is 11% of the government's $1.7 trillion student loan portfolio. According to Education Department data released in March 2026, about 9.2 million Americans are in default on student loans.

The agreement provides that the Treasury Department will first take over defaulted loan portfolios and later provide operational support over non-defaulted federal student loans to the extent practicable. The agreement states that eventually the Treasury Department will assume responsibility for all federal student loans.

"The agreement marks an intentional and historic step toward breaking up the Federal education bureaucracy and dramatically improving the administration of Federal student aid programs," Education Secretary Linda McMahon said. "As the Federal student aid portfolio soars to nearly $1.7 trillion and with nearly a quarter of student loan borrowers in default, Americans know that the Department of Education has failed to effectively manage and deliver these critical programs."

"The agency has the unique experience, the operational capability, and the financial expertise to bring long overdue financial discipline to the program and be better stewards of taxpayer dollars," Treasury Secretary Scott Bessent said.

Borrowers will not need to take any action during the transition and will continue to work with the same loan servicer and repay their loans as before. The partnership enables the Treasury Department to collect on defaulted debt and support borrowers in default.

The agreement is 17 pages long. Before the agreement, the Department of Education's Default Resolution Group managed defaulted student-loan accounts.

In 2015, the Treasury Department conducted a pilot program to collect payments from thousands of borrowers in default. The Treasury Department's success rate in the 2015 pilot program was lower than that of the private collection agencies contracted by the Education Department.

Federal student loans are typically considered in default when borrowers have not made a payment for more than 270 days.