Since taking office, the Trump administration has pledged to eliminate the U.S. Department of Education. Yet a year into his tenure, the president has made only slow progress toward that goal, trimming agency personnel around the edges but failing to take a hammer to the agency.

There is one promising reform, however, that would indicate real movement toward the goal: reallocating the Department of Education’s student loan portfolio to the Department of the Treasury. The student loan portfolio is the biggest responsibility of the Federal Student Aid office, which is the department’s largest unit by both staff and budget. Moving the program to Treasury would therefore significantly shrink the size and scope of the Department of Education. Moreover, both borrowers and taxpayers would benefit from this move.

First, students would benefit from moving Education’s loan portfolio to Treasury because it would streamline the financial aid application process. To receive student loans, borrowers must first fill out the Free Application for Federal Student Aid (FAFSA), which requires information from the individual’s (and their parents’) tax forms. Treasury, which houses the Internal Revenue Service (IRS), already has this information — but Education does not. Since 2010, borrowers have been able to use a webtool to import their IRS data into the FAFSA, but the tool has suffered from high-profile breakdowns, most notably in 2017 and 2024. These disruptions would be significantly less likely to occur if the FAFSA were housed at Treasury.

Another benefit for students is that the new Repayment Assistance Plan (RAP) allows student loan borrowers to repay their debt under a plan that calculates the amount owed as a function of their income. Under the program, repayment amounts depend on an individual’s adjusted gross income (AGI), a number Treasury knows but Education does not. In addition to streamlining annual verification to make sure students repay what they owe, Treasury could easily notify borrowers throughout the year about mismatches between the AGI implied by their tax withholding and the AGI implied by their loan payments. Such a change would help borrowers avoid huge bills at the end of the year if they inadvertently underpay after getting a raise or new job.

Moving student loans to Treasury also benefits taxpayers, and for a very simple reason: Treasury’s core competence is finance and collections, whereas Education’s is (at least in theory) education. Loans are financial instruments that involve collections. Treasury is clearly better equipped to handle them.

Treasury also has vastly more experience in risk management, fraud detection, and default collections. Indeed, Education already outsources default collections to Treasury in the form of the Treasury Offset Program, which confiscates tax refunds and other federal payments (e.g., Social Security benefits) for borrowers who have defaulted. Treasury’s vast financial experience will result in higher recovery rates.

Furthermore, while Education has consistently underestimated the costs of student loans, Treasury has a far better track record of forecasting costs and revenues. A Government Accountability Office report found that Education had estimated the federal government would make a profit of $114 billion on student loans over a recent 25-year period; instead, the government ended up taking losses of $197 billion. In other words, Education’s estimates were off by $311 billion. Indeed, Education has overestimated government profits every year for the past 25 years. Treasury, on the other hand, takes figures, estimates, and projections much more seriously; they would not make the same mistakes every year for a quarter century.

Despite the considerable advantages of moving student loans from Education to Treasury, Treasury may be understandably reluctant to take over responsibility for what, at least in recent years, has been a system plagued by scandal and problems. In the worst-case takeover scenario, Treasury could see staffing swell and the sudden appearance of a money-losing albatross (the Congressional Budget Office estimates that the government loses 3.9 cents for every dollar lent in the student loan portfolio).

To avoid this fate, Congress could include two minor reforms in a future reconciliation bill.

First, it could replace the FAFSA with a checkbox on tax returns (e.g., “check here if you would like to apply for federal financial aid for postsecondary education”). This would render many of the offices and personnel currently administering the FAFSA unnecessary.

Second, Treasury could be allowed to bill Education for any losses on the student loan portfolio. These losses are a result of legislative restrictions that stipulate who is eligible for loans and how much they need to repay. But having these losses show up on Treasury’s books could lead to unfair attacks on Treasury’s competence — criticisms that can be preempted by ensuring that the losses show up for Education instead.

Federal student loans have plenty of inherent problems, but we shouldn’t compound them by keeping the program in the wrong department. Off to Treasury they should go. And once student loans are no longer housed at Education, it will become even more clear that its few worthwhile functions could be handled more effectively elsewhere, making it easier to shutter the agency for good.