PRESS RELEASE: New DFI Legal Analysis Finds Transferring Student Loan Program to SBA Requires Congressional Action

WASHINGTON—A new legal analysis released today from the Defense of Freedom Institute for Policy Studies (DFI) finds that the Executive Branch lacks the statutory authority to transfer the federal student loan program from the U.S. Department of Education (ED) to the Small Business Administration (SBA). The paper, titled “Moving the Federal Student Loan Program to the Small Business Administration: An Analysis of Existing Statutory Authorities,” was authored by Paul Zimmerman, DFI’s Senior Policy and Regulatory Counsel.

The analysis comes in the wake of the March 21, 2025, announcement in the Oval Office that the federal student loan portfolio would move to the SBA as part of a broader initiative to close ED and return control over education to states and local communities.

The brief explains that, while narrow authority exists for interagency coordination on student loans, Congress has placed responsibility for the federal student loan program squarely with the Secretary of Education. Attempts to move that authority to another agency through executive action would likely face legal challenges, particularly considering the Supreme Court’s recent decision in Loper Bright.

The paper states, “The Supreme Court’s message in that case was simple: courts will no longer defer to agency (or, by logical extension, presidential) interpretations of statutes that stretch their meaning beyond the breaking point. To rewrite a law, Congress must legislate, and the President must sign the legislation.” It goes on to say that anything other than this constitutional process runs the risk of court action that will ultimately stymie the President’s policy agenda.  

“President Trump is absolutely right to challenge the federal role in education and work to relocate and de-politicize a federal student loan program that has been badly mismanaged by past administrations,” Zimmerman said. “This paper aims to identify the legal pitfalls that could endanger the administration’s policy agenda in the interest of ensuring that these critical changes are durable and will withstand legal scrutiny.”

Bob Eitel, President and Co-Founder of DFI, added, “The President and Secretary McMahon understand the absurdity of having the Office of Federal Student Aid in the Education Department responsible for the $1.6 trillion student loan portfolio. FSA serves 43 million borrowers and is effectively one of the largest financial institutions in the world but lacks a board of directors, has no requirements for professional governance, and endures senior leadership changes every few years. Unfortunately, Congress built the program this way, and Congress will need to fix it.”

The paper walks through relevant statutory provisions under the Higher Education Act (HEA), the General Education Provisions Act (GEPA), and the Small Business Act, while reviewing the limited historical use of agency transfer authority. It concludes that any enduring, comprehensive restructuring of responsibility for the federal student loan program will require legislative action.

To read the full paper, click here.