Treasury Department to oversee student loans. What it means for you.

The U.S. Treasury will now collect defaulted federal student loans, a move critics say could confuse borrowers.

Student loan borrowers in default will soon face a new collector – the U.S. Treasury.

The Department of Education on March 19 announced the Department of the Treasury will take over operations related to all student loans in three phases. The first involves collecting on defaulted federal student loan debt and using private collection agencies to help get defaulted borrowers into rehabilitation programs or return to good standing. Transfer of the full student loan portfolio and financial aid programs will follow.

The move was widely expected after the Trump administration suggested last year student loan responsibilities would be moved to either the Treasury Department or the Small Business Administration.

With the Treasury already equipped with systems to deal with troublesome loans, collections would be more efficient and cost taxpayers less, said Treasury Secretary Scott Bessent.

"Treasury has the unique experience, the operational capability, and the financial expertise to bring long overdue financial discipline to the program and be better stewards of taxpayer dollars," he said in a statement.