On March 19, the U.S. Department of Education (ED) and Treasury announced an interagency agreement under which Treasury will take “operational responsibility” for collecting defaulted federal student loan debt and provide “operational support” for ED’s efforts to return borrowers to repayment. The agencies’ fact sheet stated the partnership is authorized under the Economy Act, and noted that the federal student loan portfolio totals nearly $1.7 trillion, with fewer than half of borrowers in current repayment and almost a quarter in default. The fact sheet noted that Treasury will assume administration of ED’s “Default Resolution Group” and “Default Management and Collections System,” leveraging private default resolution agencies to help borrowers return to good standing.

In subsequent phases, the agencies stated Treasury will seek to provide operational support over non-defaulted federal student loan debt, to the extent practicable and permitted by law, and explore opportunities to assist other federal student aid functions, including administration of the Free Application for Federal Student Aid. ED will maintain all statutory responsibilities, including policy development, and confirmed that existing federal student aid systems will remain in place. The fact sheet noted that Treasury plans to revoke a 2001 waiver that allowed ED’s Office of Federal Student Aid to service its own defaulted debt under the Debt Collection Improvement Act of 1996.