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Fact Sheet: Department of Education and Department of the Treasury
Federal Student Assistance Partnership
What is the purpose of the partnership?
The U.S. Department of Education (ED) and the U.S. Department of the Treasury (Treasury)
have entered into an Interagency Agreement (IAA) to enhance the administration of federal
student assistance programs, mitigate the continuing fallout and cost to taxpayers from the Biden
Administration’s mismanagement of the federal student loan portfolio, and facilitate the return of
defaulted borrowers to repayment.
This partnership will support ED’s implementation of major upcoming changes to federal student
assistance made by the Working Families Tax Cuts Act. These changes – including the new
Repayment Assistance Plan (RAP) and a second rehabilitation opportunity for defaulted
borrowers – present a unique and promising opportunity to return borrowers to repayment.
The partnership will draw on Treasury’s expertise in managing highly complex financial and
information technology systems 1 and in collecting delinquent and defaulted debt for federal
agencies. 2
Why is ED entering into this partnership?
ED’s student loan portfolio stands at nearly $1.7 trillion, with fewer than half of borrowers in
current repayment and almost a quarter of borrowers in default. 3 For decades, ED has
demonstrated it is ill-equipped to manage a portfolio of this size or complexity. The federal
student loan portfolio is now roughly twice the size of all university endowments combined and
more than either all cumulative credit card debt or auto debt in our country.
This long history of mismanagement, particularly during the Biden Administration, left the
federal student loan portfolio in disarray. Rather than providing borrowers with the tools to
manage and repay their student loans, ED focused on implementing unlawful repayment and
forgiveness schemes that shifted debt to taxpayers, creating ongoing confusion for borrowers,
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The mission of Treasury’s Bureau of the Fiscal Service (BFS) is to promote the financial integrity and operational
efficiency of the federal government through exceptional accounting, financing, collections, payments, and shared
services. As the primary agency responsible for financial management, BFS is ideally positioned to assist ED’s
Office of Federal Student Aid (FSA) in improving the fiscal condition of the federal student loan program.
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FSA received a waiver from Treasury in 2001 to service its defaulted federal student loan debt under the Debt
Collection Improvement Act of 1996. As part of this Interagency Agreement, Treasury intends to revoke that
exemption.
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https://studentaid.gov/data-center
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families, financial aid administrators, and college access professionals. Notably, the Biden
Administration terminated all private collections contracts in 2021, leaving ED with little vendor
infrastructure to handle inbound calls or conduct outbound calls to assist the more than 9 million
borrowers in default who could enroll in a repayment plan or rehabilitation agreement and move
their loans back into good standing. As a result, many defaulted borrowers have languished in
default for more than six years, damaging their credit scores and the ability to pursue the
American dream. The ED-Treasury Federal Student Assistance Partnership will improve the
administration of federal student aid programs for students, institutions, taxpayers, and other
stakeholders.
Why did ED select Treasury for this partnership?
As ED returns education to the states and breaks up the federal education bureaucracy, Treasury
is well positioned to provide operational support to ED’s ongoing work to enhance the
management of the federal student assistance programs. ED and Treasury have a long history
and strong partnership in managing the federal student assistance programs:
• Treasury disburses funds for federal student loans.
• ED leverages Treasury’s federal tax information data systems for income verification for
the Free Application for Federal Student Aid (FAFSA) and income-driven repayment
plans.
• ED uses the Treasury Offset Program (TOP) for involuntary debt collections.
• Treasury and ED have contracted with an overlapping set of private collection agencies
that have experience with the intricacies of collecting on federal student loans.
• The Financial Literacy and Education Commission (FLEC), which is chaired by
Treasury, is used by ED and institutions of higher education to educate borrowers on
student loan debt.
• ED has worked with Treasury on employment data for its forthcoming accountability
framework.
The IAA is an extension of these existing workstreams. Treasury is already a key partner in
administering federal student assistance programs, and expanding its role is a logical next step in
the evolution of the agencies’ longstanding partnership.
How will the partnership work?
Under the agreement, Treasury will assume operational responsibility for collecting on defaulted
federal student loan debt, leveraging private default resolution agencies to help defaulted
borrowers enroll in rehabilitation or otherwise return to good standing. Treasury will also assume
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operational responsibilities for FSA’s Default Resolution Group, which provides direct support
for those borrowers who have defaulted on their student loans and operates the Default
Management and Collections System (DMCS). In subsequent phases, Treasury will work to
provide operational support over non-defaulted federal student loan debt, to the extent
practicable and permitted by law, while also seeking opportunities to provide operational support
to FSA’s other functions, including the administration of the FAFSA form and more. ED,
through both the Office of Postsecondary Education and FSA, will maintain all statutory
responsibilities including policy development.
Throughout each phase of the partnership, ED, in conjunction with Treasury, will communicate
directly with stakeholders, including students, parents, borrowers, institutions, and vendors, to
outline anticipated plans and timelines and address any questions. Building on the Trump
Administration’s successful efforts to fix the FAFSA form, ED will ensure that the partnership is
implemented effectively and enhances the delivery of federal financial aid for students and
families.
Under what statutory authorities will Treasury and ED perform their activities under the
partnership?
The partnership will be implemented under a commonly utilized interagency agreement
framework authorized by the Economy Act, 31 U.S.C. § 1535. Treasury also has broad authority
to collect delinquent and defaulted federal debts under the Debt Collection Improvement Act, 31
U.S.C. §§ 3701-3720E.
How does this partnership align with the purpose of FSA’s Performance-Based
Organization (PBO)?
The ED-Treasury Federal Student Assistance Partnership is aligned with the purpose of the PBO
legislation, which requires FSA to provide high-quality customer service to students and other
participants in the federal student financial assistance programs and increase accountability. The
PBO legislation also provides FSA greater flexibilities in the management and administration of
its programs, including establishing partnerships with other agencies in order to increase
efficiencies and improve program integrity.
What impact will this agreement have on institutions of higher education?
All existing federal student aid systems such as the FAFSA, Common Origination and
Disbursement (COD) System, and the National Student Loan Data System (NSLDS) will remain
in place and will continue to be administered in accordance with applicable statutory
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requirements. FSA, in conjunction with Treasury, will continue to communicate with colleges
and universities through the existing FSA Knowledge Center.
Institutions of higher education that have pending matters with FSA should continue to reach out
using caseteams@ed.gov.
What impact will this agreement have on students, families, and borrowers?
Students and families will continue to receive the high-quality service they have come to expect
under the Trump Administration, and borrowers will not have to take any additional actions.
Borrowers must continue to repay their student loans and work with their assigned loan servicer
for any questions or assistance. Borrowers with defaulted loans should continue to visit
myeddebt.ed.gov for help getting out of default and for updates as Treasury assumes
responsibility for collecting on defaulted loans.
Is there precedent for such partnerships?
IAAs are a tool commonly used by government agencies to share services, collaborate, and
ensure efficient service delivery. Agencies frequently rely upon these agreements, so much so
that the government has standardized forms to facilitate agencies’ use of them. IAAs have been
used by both large and small agencies in Democrat and Republican administrations alike. IAAs
serve many purposes, and they are often used for administering grant programs.
For example, in 2022, the Biden Administration’s Department of Justice, Federal Bureau of
Prisons signed an IAA designating the U.S. Department of Labor (DOL) to administer grants
under the First Step Act. More recently, ED and DOL successfully implemented an IAA to
streamline the adult education and family literacy programs funded under Title II of the
Workforce Innovation and Opportunity Act (WIOA) and career and technical education (CTE)
programs funded by Perkins V. The U.S. Department of Agriculture and U.S. Department of
War recently announced a partnership to implement the National Farm Security Action Plan. In
summary, ED has entered into IAAs with other federal agencies for many years when doing so
has been in the best interest of the U.S. government such as when such agreements are cost-
effective or provide enhanced or more efficient program support.
Likewise, the Economy Act has been used by federal agencies in the past to enter into contracts
with other agencies to perform services. These contracts are commonly used to implement IAAs
through a contract for services. ED will continue to perform all statutorily required duties and
responsibilities.
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