US education department insiders warn student loan system at risk: ‘The gatekeepers are gone’

Hundreds of firings inside the federal government’s student aid department have sparked concern among workers and student loan advocates, who warn that the student loan system is at risk.

Linda McMahon, the wrestling industry billionaire now serving as education secretary, has presented the sweeping cuts as an efficiency drive. But employees within the US Department of Education warn they set the stage for widespread fraud and abuse.

“They got rid of all of the quality checkers. It’s only a matter of time [before] they cause the whole system to fail,” said one senior official who was spared by the cuts. They requested to remain anonymous for fear of retaliation.

“If this was a bank, and they fired all the quality assurance team, their regulator would have shut them down,” the official said. “It’s the opposite of safety.”

Federal Student Aid, a unit within the education department, oversees $1.6tn in student loans. At least 300 of its employees were dismissed last week.

Following the firings, Trump signed an executive order on Thursday instructing McMahon to start dismantling the Department of Education, in an apparent attempt to circumvent the need to obtain congressional approval to formally close a federal department.

The Free Application for Federal Student Aid (Fafsa) website also experienced an hours-long outage. Officials denied it was related to the cuts.

The senior official argued the blitz will likely result in more issues, such as longer wait times to get in contact with loan service providers, and more errors. “As an organization, we were already doing a lot more work than our staffing provides. We would need 10 times more people for a bank of our size,” they said.

The Trump administration is also “lying” about how the cuts were targeted, according to the official. “They said they got rid of low performers, but they didn’t do any of that assessment.”

In a statement to the Guardian, the Department of Education claimed that no employees working on the Fafsa or student loan servicing were affected by last week’s cuts.

“The department will deliver high-quality customer service to borrowers,” a spokesperson said. They pointed to a press release on the firings, which stated that the department would continue to deliver on “all statutory programs” under its agency’s purview, including student loans.

Student financial aid administrators, policy experts and trade unions are skeptical.

A fired Federal Student Aid employee explained that their department worked with academic institutions and state agencies to ensure compliance, process applications and recertify institutions seeking federal funds.

“We were already severely understaffed. Without our office, these schools are stuck in limbo,” they said. “It’s mind-boggling. Everything we do is under statute.”

They explained that the School Eligibility and Oversight Group handled recertifications, initial applications, updates, mergers, changes in ownerships, program reviews and cash monitoring.

“What Linda McMahon has done is given 5,000 institutions the green light to cause massive amounts of taxpayer fraud and abuse of federal financial aid dollars financed by taxpayers without any check and balances in place,” the fired employee said, comparing it to the 1980s, when for-profit academic institutions engaged in abuse and fraud that propelled the sector’s student loan default rate to a record 41%.

“The gatekeepers are gone,” the source added. “State agencies are now scrambling with how they have to move forward.”

The mass firings alarmed advocates for student borrowers.

“These civil servants were working to ensure students and families can pay for college, working to protect students and families from predatory for-profit colleges, and holding servicers accountable for pushing millions further into debt,” said Aissa Canchola Bañez, policy director at the Student Borrower Protection Center Policy.

The Institute for College Access and Success is “particularly concerned” about how the cuts could threaten college students and student loan borrowers, Sameer Gadkaree, its president, said. “Core functions of the department could experience outages or breakages, leaving students struggling to get or renew financial aid or campus-based aid.

“Student loan borrowers, meanwhile, will struggle to access the benefits current law provides. And they can’t be sure they will get reliable, accurate advice on student loan repayment.”

Earlier this week, the American Federation of Teachers filed a lawsuit against the Department of Education over its suspension of applications and reviews of all income-driven repayment plans, a move which affects millions of borrowers.

Administrators are dubious of the Trump administration’s claims that the education department will continue to deliver all statutory programs, as it has claimed. “This is hard for anyone to believe,” Thomas McWhorter, dean of student financial services at Northeastern University, wrote on LinkedIn.

“It means oversight is gone, and approvals may never happen or there is no enforced compliance of statutory regulations,” he added. “And students will be impacted with these changes.”