This drastic move resulted in the layoff of at least 300 employees from the Federal Student Aid unit, which manages a staggering $1.6 trillion in student loans.

On March 20, 2025, President Trump signed an executive order directing Education Secretary Linda McMahon to dismantle the Department of Education, bypassing Congress.

As a consequence of these significant staff cuts, the U.S. Department of Education now faces serious risks to its student loan system, with insiders warning of potential fraud and system failure.

A senior official indicated that the layoffs could lead to longer wait times and increased errors in loan servicing, exacerbating existing understaffing issues.

Former employees have raised alarms that these cuts could enable massive taxpayer fraud, allowing institutions to operate without adequate oversight, reminiscent of past abuses in the for-profit education sector.

Despite the administration's claims that the layoffs were aimed at increasing efficiency, many employees believe this will undermine the integrity of the system.

Student advocacy groups and financial aid experts have expressed deep concern that these changes could severely impact students' access to financial aid and reliable loan repayment advice.

Compounding these issues, the FAFSA website recently experienced an outage, which officials claimed was unrelated to the layoffs, but it raised additional concerns about the system's reliability.

Insiders have disputed the administration's assertions about targeting low performers, claiming that no proper assessments were made prior to the firings.

Many administrators doubt the government's assurances that all statutory programs will continue to function properly, voicing concerns about unregulated operations and negative impacts on students.

An anonymous senior official expressed fears that the lack of quality assurance personnel could lead to a complete system failure, drawing a parallel to a hypothetical bank scenario.

In response to the turmoil, the Department of Education stated that no employees involved in FAFSA or student loan servicing were affected and assured continued high-quality service to borrowers.