Student loan collection is managed by the Treasury Department

The Trump administration announced Thursday that it will task the U.S. Treasury with collecting delinquent student loans.

Currently, the U.S. Department of Education oversees the country’s approximately $1.7 trillion federal education debt portfolio held by approximately 42 million borrowers.

The Treasury Department will take on additional duties related to federal student loans over time and eventually provide “administrative support” for current loans, according to a joint announcement by the two agencies.

President Donald Trump has repeatedly said he intends to dismantle the Department of Education and transfer education authority to the states. U.S. Secretary of Education Linda McMahon said in a statement that the partnership with the Treasury Department is “a historic step toward dismantling the federal education bureaucracy.”

Some student loan borrowers may see a more direct and immediate impact from this change than others.

“Borrowers are looking for clarity and certainty with their student loans,” said Landon Wormund, a certified financial planner and certified student loan specialist with Reliant Financial Services in Kansas City, Missouri. “This recent announcement adds to the uncertainty.”

Here’s what we know so far:

The government said it was in a better position to recover the debt because the Treasury had an offset program. This program includes enforcement of child support and other outstanding federal and state debts.

“Under President Trump’s leadership, we are embarking on the first serious effort to clean up a $1.7 trillion portfolio that has been badly mismanaged for years,” Treasury Secretary Scott Bessent said in a statement about the transition.

“The Treasury Department has the unique experience, operational capabilities, and financial expertise to bring long-overdue fiscal discipline to the program and better manage taxpayer funds,” Bessent said.

According to the Department of Education, about 9 million borrowers are in default.

The Ministry of Finance has been involved in student loan recovery efforts in the past. But according to a 2016 blog post archived on the Internet Archive’s Wayback Machine, the department itself discovered that it was collecting the information for a lower fee than private companies.

“Moving collections to the U.S. Treasury does not improve effectiveness,” Kantrowitz said.

Currently, only defaulted student loan borrowers are affected by this change. Generally, you are not considered delinquent on your federal student loans unless you make on-time payments for at least 270 days.

If you are that far behind, the Treasury Department will likely be tasked with collecting your debt. Kantrowitz said Maximus, the student loan servicer that handles defaulted government accounts, is unlikely to change.

The federal government has extraordinary collection powers over student loans, and can seize a borrower’s tax refund, wages, Social Security retirement benefits, and disability benefits. However, these collection efforts have been paused for now, and the Trump administration has not said when they will resume.

Experts say the terms cannot be changed, even if the agency that oversees federal student loans does so. The borrower’s rights are secured when he signs the master promissory note.

Warmund, a member of CNBC’s Financial Advisory Council, said borrowers concerned about losing their data or repayment history during the transition from Education Department to Treasury Department oversight should download files from the National Student Loan Data System.

Those who have defaulted on their loans can contact the government’s default resolution group and take a variety of steps to keep their loans in order, including enrolling in an income-driven repayment plan or signing up for loan rehabilitation.

Trump administration officials said the Treasury Department would eventually “work to provide operational support for non-defaulted federal student loan debt as well.”

But the language is too vague for borrowers to know what it means, said Betsy Mayotte, president of the Association of Student Loan Advisors, a nonprofit that helps borrowers repay their loans.

“I think there will be more questions and pushback about the subsequent steps,” Mayotte said.

CNBC Make It reporter Camaron McNair contributed reporting.