Buried within the Education Department’s fiscal 2021 budget request is a proposal that would transform student loan financing.
Originally raised by Education Secretary Betsy DeVos at the end of 2019, it aims to spin Federal Student Aid — the branch of the Education Department responsible for overseeing student loan financing — into a separate agency.
The office manages a loan portfolio worth nearly $1.5 trillion, and is effectively one of the country’s largest banks. In a press briefing following the budget release, DeVos and other department officials highlighted the proposal, arguing it would depoliticize the student loan financing process.
“The best we can do for our students, families and taxpayers alike is serve them, free from political influence,” said Mark Brown, chief operating officer of Federal Student Aid. “Our mission keeping the promise of education to America’s students is far too important to be subject to shifting political winds.”
The proposal would restructure Federal Student Aid into an independent government agency, managed by a board of governors. “Now, I’m not so sure the federal government should monopolize student lending, but if it does — and, for now, it essentially does — then it must provide services on par with world-class financial firms,” DeVos said at a speech at the Federal Student Aid Conference in December.
Democrats are already criticizing her plan.
“The Federal Student Aid office should already be putting students at the center of its work and should already be free from political whims,” House Education and Labor Chairman Robert C. Scott, a Virginia Democrat, said in a statement. “There’s nothing that could be done with a new agency that can’t be done today.”
But the National Association of Student Financial Aid Administrators is hopeful about the idea, and believes it could earn the support of Republicans and Democrats alike.
“I hope what it means is that at the end of whatever this process looks like, we have an agency that is more responsible to students and schools and other stakeholders,” says Justin Draeger, the group’s CEO.