$1.6 trillion of student loans are up in the air as Trump moves in on the Department of Education

The justices on Monday paused a lower court order that had halted nearly 1,400 layoffs and had called into question the legality of President Donald Trump’s plan to outsource the department’s operations to other agencies.

Now, Trump and McMahon are free to execute the layoffs and break up the department’s work among other federal agencies. Trump had campaigned on closing the department, and McMahon has said the department has one “final mission” to turn over its power to the states.

“The U.S. Department of Education will now deliver on its mandate to restore excellence in American education,” McMahon said Monday in a statement.

Department lawyers have already previewed the next steps in court filings.

What happens with student loans, civil rights cases

Trump and McMahon have acknowledged only Congress has authority to close the Education Department fully, but both have suggested its core functions could be parceled out to different federal agencies.

Among the most important decisions is where to put management of federal student loans, a $1.6 trillion portfolio affecting nearly 43 million borrowers.

Trump in March suggested the Small Business Administration would take on federal student loans, but a June court filing indicated the Treasury Department is expected to take over the work. The Education Department said it had been negotiating a contract with Treasury but paused discussions when the court intervened. That work is now expected to proceed in coming days.

Under a separate arrangement, nine Education Department workers already have been detailed to Treasury, according to a court filing.

The department had also recently struck a deal to outsource the management of several grant programs for workforce training and adult education to the Department of Labor. The Education Department agreed to send $2.6 billion to Labor to oversee grants, which are distributed to states to be passed down to schools and colleges.

Combining workforce training programs at Education and Labor would “provide a coordinated federal education and workforce system,” according to the agreement.

Additional agreements are expected to follow with other agencies. At her Senate confirmation hearing, McMahon suggested that enforcement of the Individuals with Disabilities Education Act could be handled by the Department of Health and Human Services. Civil rights work could be managed by the Justice Department, she said.

Democracy Forward, which represents plaintiffs in the lawsuit, said it will pursue “every legal option” to fight for children. The group’s federal court case is proceeding, but the Supreme Court’s emergency decision means the Education Department is allowed to downsize in the meantime.

“No court in the nation — not even the Supreme Court — has found that what the administration is doing is lawful,” said Skye Perryman, president and CEO of the group, in a statement.

Laying off staff

Trump campaigned on a promise to close the agency, and in March ordered it to be wound down “to the maximum extent appropriate and permitted by law.” McMahon had already started a dramatic downsizing, laying off about 1,400 workers.

Education Department employees targeted by the layoffs have been on paid leave since March, according to a union that represents some of the agency’s staff. The lower court order had prevented the department from fully terminating them, though none had been allowed to return to work, according to the American Federation of Government Employees Local 252. Without the lower court order, the workers would have been terminated in early June.

The absence of those staffers already had caused problems in the office that handles student loans, said Melanie Storey, president and CEO of the National Association of Student Financial Aid Administrators. College financial aid staffers reported delays and breakdowns in federal systems — such as an hours-long outage on StudentAid.gov the day after departmental layoffs. Communication with the Education Department eroded, Storey said.

“It is concerning that the Court is allowing the Trump administration to continue with its planned reduction in force, given what we know about the early impact of those cuts on delivering much-needed financial assistance to students seeking a postsecondary education,” Storey said.

Gutting the Education Department will hinder the government’s ability to enforce civil rights laws, especially for girls, students with disabilities, LGBTQ+ students and students of color, said Gaylynn Burroughs, vice president at the National Women’s Law Center. Laid-off staff in the Office of Civil Rights were handling thousands of cases.

“Without enough staff and resources, students will face more barriers to educational opportunity and have fewer places to turn to when their rights are violated,” Burroughs said in a statement. “This is part of a coordinated plan by the Trump administration to dismantle the federal government and roll back hard-won civil rights protections.”

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AP education writers Annie Ma and Cheyanne Mumphrey contributed reporting.

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