Phase two involves the transfer of oversight for non-defaulted loans, a significantly larger and more complex portfolio. Phase three is intended to provide operational support for the Free Application for Federal Student Aid (FAFSA) and other critical functions that are currently managed by the Department of Education. As part of this ongoing transition, some FSA staff members have already been relocated and are now operating out of the Treasury Department’s offices.
Ellen Keast, a spokesperson for the Education Department, declined to address the specific details of the Washington Sun report but reiterated the administration’s broader philosophy. She noted that the administration is focused on "breaking up the federal education bureaucracy" and returning authority to the states.
The OMB also weighed in, calling the reporting "inaccurate," while the Treasury Department did not respond to requests for comment. Despite these denials, the alignment between the reported plan and the administration’s stated goals has kept the education community on high alert.
Bureaucratic Reform or "Intentional Sabotage"?
The prospect of an independent FSA has divided experts and observers. Melanie Storey, president of the National Association of Student Financial Aid Administrators (NASFAA) and a former FSA official, noted that the reported plans seem to mirror the third phase of the existing Treasury agreement. The key distinction, she explained, is whether the office becomes a bureau within the Treasury or a fully independent agency.
If the FSA were to become an independent agency, it would function as a standalone bureau or subdivision, coordinating with both the Department of Education and the Treasury. However, such a change would likely require the approval of Congress. Under current law, specifically the Higher Education Act of 1965, the Department of Education is legally mandated to manage all student aid authorized under Title IV.
A source familiar with the current status of the FSA expressed skepticism regarding the feasibility of the independence plan. Speaking on the condition of anonymity, the source suggested that there is no substantive, detailed plan to make the FSA independent, even as a bureau of the Treasury. They pointed to the recent appointment of Rhonda Shaffer, the FSA’s chief financial officer, as the new head of the Treasury Partnership. The source argued that such a leadership change would be illogical if the office were truly destined to become its own separate agency.
In this view, the rumors of an independent agency may be a tactical move by the OMB to pressure the Education and Treasury Departments to accelerate their existing agreements.
However, critics see something more afoot. Senator Patty Murray, a Democrat from Washington and vice chair of the Appropriations Committee, released a scathing statement following the reports. She questioned the logic of creating an entirely new federal agency to perform work that is already being done, labeling the move "intentional sabotage."
"Tens of millions of Americans are depending on government to actually work here," Murray said. "Trump has already pushed out nearly half of the FSA’s staff—this threats to create true financial chaos in people’s lives."
