Democratic senators ask McMahon for details on student loan administration spending

Four Democratic senators sent a letter Wednesday to Education Secretary Linda McMahon, calling for her to share details on how her department used $1 billion in funding intended for student loan administration.

The letter, authored by Sens. Cory Booker (D-N.J.), Jeff Merkley (D-Ore.), Chris Van Hollen (D-Md.) and Elizabeth Warren (D-Mass.), questions why the Education Department has been “unable to meaningful alleviate the ongoing student loan default crisis” with its One Big Beautiful Bill Act (OBBBA) funding. The lawmakers shared the letter with The Hill

The tax and spending framework, which President Trump signed into law last year, afforded the Education Department $1 billion specifically for student aid administration in fiscal 2025.

But in its budget request from Congress for fiscal 2027, the department noted it had spent roughly $215.5 million of that funding as of the start of fiscal 2026 last October. The request also said more than $452.4 million of the $1 billion fund will remain unspent when the fiscal year ends on Sept. 30.

In their letter to McMahon, the four Democratic senators argued it was “unclear” how exactly her department spent that $215.5 million.

They went on to ask the Education Department to outline how it used the money — including whether it went toward paying student loan servicers, facilitating the interagency agreement it has with the Treasury Department or supporting its Federal Student Aid office’s “outreach” to borrowers in default or at risk of default.

The lawmakers requested McMahon provide these details by Sept. 16.

The Hill has reached out to an Education Department spokesperson for comment.

In the second quarter of 2026, 10.6 percent of student loan balances were delinquent — or at least 90 days past due, up from 10.3 percent in quarter one, according to the Federal Reserve Bank of New York’s quarterly report on household debt and credit.

Outstanding student loan debt stood at $1.65 trillion in the second quarter, per the New York Fed. The average federal student loan debt is $40,467 per borrower, according to the Education Data Initiative .

The Education Department made a slew of changes to the federal student loan repayment system under the OBBBA, including the addition of two new repayment plans.

Borrowers who take out loans after July 1 of this year must now repay the government via either using the Tiered Standard Plan (TSP) — which adjusts based on the amount of an individual’s principal balance, the interest rate on their loans and the length of their repayment period — or the Repayment Assistance Plan .

Borrowers who take out loans under the latter plan will make monthly payments based on their income and number of dependents.

The department is also phasing out the Biden-era Saving on a Valuable Education (SAVE) plan, which multiple federal judges halted in 2024 .

The more than 7.5 million borrowers still enrolled in the SAVE Plan must choose another avenue by Sept. 30, or else the department will automatically switch them to either the new tiered plan or the older Standard Repayment Plan.

Moving from the SAVE Plan to the Standard Repayment Plan will “dramatically raise monthly payments for borrowers” and put them “at an elevated risk of default,” the Democratic senators wrote to McMahon.

“Instead of making it a priority to lower costs for borrowers and alleviate the default crisis, the Trump administration has dedicated its energy to transferring student loan administration to the Treasury Department — a change that will do nothing to help borrowers, violates federal law, and only serves to advance the administration’s blatantly political crusade to dismantle [the Education Department],” the lawmakers wrote.