The Small Business Administration (SBA) will oversee the students loans of some 40 million borrowers, US President Donald Trump said on Friday, a day after he ordered the dismantling of the education department.
The move to shutter much of the education agency – a campaign promise from Trump – raised questions about what would happen to services housed there, including student loan management.
"[SBA is] all set for it, they're waiting for it and it will be serviced much better than it has in the past, it's been a mess," Trump said in the Oval Office on Friday.
Trump said the move on loans would happen "immediately" but offered no specifics on timeline.
In addition to the SBA's take over of student loans, Trump said the Health and Human Services Department will start handling some services for students – another function previously performed by the education department.
"[Robert F Kennedy Jr] will be handling special needs and all of the nutrition programs and everything else. Rather complex," Trump said.
Earlier in the week, Trump accused the education department of "breath-taking failures", and vowed to return the money it controls to individual states.
States already control most aspects of education in the US, including setting curriculum. Most US children attend public schools, which are free and run by state and local officials.
The federal agency did handle loan programs that helped US students pay for university tuition.
The shifts come as the Trump administration continues to curtail government spending, shutting down agencies and laying off staff.
The SBA separately announced Friday that it planned to slash more than 40% of its workforce.
Officials said the cuts would save the agency more than $435 million a year by next fiscal year.
The BBC's Nomia Iqbal looks at constituent backlash facing both parties over the Trump administration's sweeping cuts.
The US president is expected to order a shutdown of the department, which he has already cut back.
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