Treasury assumes federal student loan default collections under interagency agreement

JD Supra Finance & Banking

Published March 30th, 2026

Detected March 30th, 2026

Summary

The U.S. Department of Treasury and Department of Education announced an interagency agreement under the Economy Act transferring operational responsibility for federal student loan default collections to Treasury. Treasury will assume administration of ED's Default Resolution Group and Default Management and Collections System, leveraging private default resolution agencies to help borrowers return to good standing. The federal student loan portfolio totals nearly $1.7 trillion, with fewer than half of borrowers in current repayment and almost a quarter in default.

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What changed

On March 19, 2026, the Department of Education and Treasury announced a historic interagency partnership transferring operational responsibility for defaulted federal student loan debt collection to Treasury, authorized under the Economy Act. Treasury will assume administration of ED's Default Resolution Group and Default Management and Collections System, using private default resolution agencies to assist borrowers in returning to good standing. In subsequent phases, Treasury plans to expand operational support to non-defaulted federal student loans and explore assistance with other federal student aid functions, including FAFSA administration. Treasury also plans to revoke a 2001 waiver that allowed ED's Office of Federal Student Aid to service its own defaulted debt under the Debt Collection Improvement Act of 1996.

Borrowers currently in default should expect Treasury to assume collection operations, while federal student loan servicers and default resolution agencies should prepare for operational changes and potential new coordination requirements with Treasury. ED will retain all statutory responsibilities and policy development authority, with existing federal student aid systems remaining in place. Compliance teams should monitor for forthcoming implementation guidance from Treasury regarding the transition timeline and operational requirements for private collection agencies.

What to do next

Monitor Treasury's implementation timeline for assuming default collection operations
Review existing contracts with ED collection agencies for transition provisions
Prepare borrower communication strategies for Treasury's assumption of default resolution functions

Source document (simplified)

March 30, 2026

Treasury to assume federal student loan default collections under new interagency agreement

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On March 19, the U.S. Department of Education (ED) and Treasury announced an interagency agreement under which Treasury will take “operational responsibility” for collecting defaulted federal student loan debt and provide “operational support” for ED’s efforts to return borrowers to repayment. The agencies’ fact sheet stated the partnership is authorized under the Economy Act, and noted that the federal student loan portfolio totals nearly $1.7 trillion, with fewer than half of borrowers in current repayment and almost a quarter in default. The fact sheet noted that Treasury will assume administration of ED’s “Default Resolution Group” and “Default Management and Collections System,” leveraging private default resolution agencies to help borrowers return to good standing.

In subsequent phases, the agencies stated Treasury will seek to provide operational support over non-defaulted federal student loan debt, to the extent practicable and permitted by law, and explore opportunities to assist other federal student aid functions, including administration of the Free Application for Federal Student Aid. ED will maintain all statutory responsibilities, including policy development, and confirmed that existing federal student aid systems will remain in place. The fact sheet noted that Treasury plans to revoke a 2001 waiver that allowed ED’s Office of Federal Student Aid to service its own defaulted debt under the Debt Collection Improvement Act of 1996.

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