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In a dramatic legal twist that could have upended the lives of millions of borrowers, a federal judge in Boston has halted the Trump istration's plan to move federal student loan management from the Department of Education to the Small Business istration (SBA) - a move critics say would have plunged the $1.6 trillion loan system into chaos.
U.S. District Judge Myong Joun issued a preliminary injunction Thursday, blocking President Donald Trump's executive order that sought to dismantle the Department of Education and fire more than 2,000 employees - nearly half the agency's workforce. The judge also froze the immediate transfer of student loan oversight to the SBA, citing legal and structural risks.
Legal experts warn the rushed transfer could have rendered loan contracts unenforceable, as promissory notes legally bind borrowers to the Department of Education, not the SBA. "This could have destabilized the entire student loan system," one legal analyst noted.
Managing student debt would be impossible for the SBA
The SBA itself is in the middle of a reorganization that's set to slash nearly half its workforce, raising serious concerns about its ability to absorb such a massive financial and istrative burden. Critics called the plan reckless, warning it jeopardized the federal government's ability to service or collect student debt.
This is the first time a federal court has declared the Trump istration's aggressive education shake-up unlawful. The plan, outlined in a March 20 executive order, was part of a broader push by the president and some congressional Republicans to abolish the Department of Education - a cabinet-level agency created by Congress in 1979.
Legislation such as S.5384 and H.R.369 already aims to transfer student loan istration to the Treasury Department - but Trump's executive action attempted to by that process altogether by fast-tracking the transition to the SBA.
The battle is just beginning
The lawsuit, brought by a coalition of state attorneys general, educational institutions, and nonprofit organizations, argued the president lacks the authority to shutter an agency created by Congress without legislative approval.
For now, the judge's order keeps the Department of Education - and its $1.6 trillion student loan portfolio - intact. But with Project 2025 and similar efforts looming on the horizon, the battle over America's education system is far from over.