Four Democratic senators are pressing Education Secretary Linda McMahon for a detailed accounting of how her department has spent $1 billion earmarked for student loan administration, arguing that the money has done little to ease a worsening default crisis.
In a letter sent Wednesday, Sens. Cory Booker (D-N.J.), Jeff Merkley (D-Ore.), Chris Van Hollen (D-Md.) and Elizabeth Warren (D-Mass.) demanded that the Education Department outline exactly where the funds went — whether to loan servicers, to the Treasury Department under an interagency agreement, or to outreach efforts for borrowers in or near default. The lawmakers gave McMahon a Sept. 16 deadline to respond.
The funding was included in the One Big Beautiful Bill Act (OBBBA), signed by President Trump last year, which set aside $1 billion for student aid administration in fiscal 2025. But the department's fiscal 2027 budget request revealed that as of the start of fiscal 2026 in October, only about $215.5 million of that sum had been spent, and more than $452.4 million is projected to remain unspent by the end of September.
“It remains unclear how the Department spent the $215.5 million that has been disbursed to date,” the senators wrote, according to a copy obtained by The Hill. They also criticized the administration’s broader approach, saying it has prioritized shifting student loan operations to the Treasury Department over helping borrowers — a move they argue violates federal law and serves a “blatantly political crusade” to dismantle the Education Department.
The pressure comes as delinquency rates climb. Federal Reserve Bank of New York data shows 10.6% of student loan balances were at least 90 days past due in the second quarter of 2026, up from 10.3% in the first quarter. Total outstanding student debt stands at $1.65 trillion, with the average federal borrower owing about $40,467, according to the Education Data Initiative.
Under OBBBA, the Education Department overhauled the repayment system, adding two new plans: the Tiered Standard Plan (TSP), which adjusts payments based on principal, interest rate, and repayment length, and a Repayment Assistance Plan that ties monthly payments to income and family size. The department is also phasing out the Biden-era Saving on a Valuable Education (SAVE) plan, which federal courts blocked in 2024.
More than 7.5 million borrowers still enrolled in SAVE must choose a new plan by Sept. 30, or they will be automatically moved to either the tiered plan or the older Standard Repayment Plan. The senators warned that shifting borrowers to the standard plan would “dramatically raise monthly payments” and put them at “an elevated risk of default.”
The Education Department did not immediately respond to a request for comment. The dispute is part of a broader fight over McMahon’s stewardship of the agency, which the administration has sought to shrink. Meanwhile, the political stakes are high as Democrats use the issue to attack the administration’s education policies ahead of the 2026 midterms.
The senators’ letter also comes as schools struggle with chronic absenteeism and other challenges, though the focus here is squarely on the student loan system’s administrative failures. With default rates rising and billions in allocated funds sitting idle, the Democratic lawmakers are demanding answers that could shape the debate over the department’s future.
