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WASHINGTON- Today, House Small Business Committee Ranking Member Nydia M. Velázquez (D-NY) sent a letter to President Donald Trump and Secretary of Education Linda McMahon raising alarm over the administration’s plans to transfer the Department of Education’s (DOE) $1.6 trillion federal student loan portfolio to the Small Business Administration (SBA).

In the letter, Velázquez warned that the move is deeply misguided and potentially unlawful and would jeopardize federal student loans and borrower forgiveness programs. 

“The Department of Education, through the Office of Federal Student Aid (FSA), has developed the expertise, infrastructure, and oversight mechanisms necessary to manage these complex financial instruments and the borrowers they serve,” wrote Ranking Member Velázquez. “Transferring this massive responsibility to the SBA, which is tasked with administrating disaster recovery loans and offering other critical resources to American small businesses would jeopardize the consistent management of federal student loans and borrower forgiveness programs.”

The letter also raises concerns about the move, in light of recent significant staff cuts at the agency. Velázquez warned that assigning the massive student loan portfolio on top of a reduced staff would limit the ability of entrepreneurs across the country to access SBA programs.

Velázquez requested answers to the following questions from SBA by April 21:

1. What complications will arise from a 43% reduction in the Small Business Administration workforce and the added responsibility of managing the disbursement of student loans for millions of borrowers?

1. Will Small Business Administration staff members be provided training and resources to manage the student loan portfolio – or will experienced Department of Education staff be transferred?

1. What is the expected timeline to move the student loan portfolio from the Department of Education to the Small Business Administration?

“To avoid further confusion, errors, longer processing times and more people defaulting on their loans,” Velázquez concluded, “I strongly urge you to reconsider transferring the federal student loan portfolio to the Small Business Administration and encourage you to work with Congress to strengthen and streamline the federal student loan payment programs and forgiveness programs to better support borrowers.”

For a full copy of the letter, click here.

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