Federal Direct PLUS Loans End in 2026 as Bill Mandates DOE Shutdown by October 2026

This legislation, ambitiously titled the “Orderly Liquidation of the Department of Education Act,” is exactly what it sounds like: a plan to dismantle the entire U.S. Department of Education (DOE) and send its responsibilities elsewhere. The bill mandates that the DOE cease to exist as a cabinet-level agency by October 1, 2026, based on the finding that the Department has failed to improve U.S. education over the last 45 years and has instead imposed overly restrictive rules on local control (Sec. 2).

The Great Federal Shuffle: Where Does the Work Go?

If you thought the DOE was just about student loans, think again. This bill is a massive administrative puzzle, scattering critical functions across the federal landscape. The goal is to push power back to the states, but first, the federal government needs to figure out who handles the programs currently running. For instance, the Individuals with Disabilities Education Act (IDEA) grants and programs like the 21st Century Community Learning Centers will move to a newly created Office of Education within the Department of Health and Human Services (HHS) (Sec. 5). Meanwhile, the Institute of Education Sciences, which handles federal education research, also lands at HHS (Sec. 8).

The Student Loan Shake-Up

For anyone with college debt or kids heading to school, this is the most immediate and disruptive change. The bill moves the management of virtually all federal student financial aid—including the massive William D. Ford Federal Direct Loan Program—from the DOE over to the Department of the Treasury (Sec. 5). That’s right: the agency that manages the nation’s money will now manage your student debt. While the bill doesn't change existing loan terms, it’s a huge shift in who is servicing and overseeing this trillion-dollar portfolio.

Even more critical is the termination of the Federal Direct PLUS Loan program. After October 1, 2026, the government will no longer issue any new PLUS Loans (Sec. 7). This loan is a lifeline for many graduate students and parents helping their kids pay for college when other aid runs out. Ending this program outright removes a major financing mechanism for higher education, potentially restricting access for families who rely on it to bridge the gap. If you’re planning on using a PLUS loan for a term starting after that date, you’ll need a new plan.

Civil Rights and Funding Cliffs

Two other massive shifts will impact schools nationwide. First, the Office for Civil Rights (OCR), which enforces anti-discrimination laws in schools (like Title IX), is being moved from the DOE to the Department of Justice (DOJ) (Sec. 9). While the DOJ is certainly equipped for enforcement, moving OCR away from a dedicated education department raises questions about whether education-specific civil rights issues will maintain the same priority level they currently hold.

Second, the bill sets a hard expiration date for funding for two major parts of the Elementary and Secondary Education Act (Part A and Part D of Title I) after October 1, 2036 (Sec. 6). Title I, Part A provides financial assistance to local educational agencies and schools with high numbers or high percentages of children from low-income families. This means that funding mechanisms for critical support programs for disadvantaged students are scheduled to simply vanish in 13 years, creating a massive fiscal cliff for school districts across the country.

The Human Cost of the Liquidation

Finally, the bill includes a provision that, while seemingly minor, could lead to chaos: the employees of the DOE are not required to transfer along with their functions (Sec. 5). Imagine your company shuts down and moves all its projects to other firms, but the people who know how those projects work are left behind. This risks a massive loss of institutional knowledge, potentially crippling the ability of the receiving agencies (like HHS, Treasury, and Labor) to effectively manage complex programs like IDEA grants and student loan servicing when they take over on October 1, 2026. This lack of mandated staff transfer could make the “orderly liquidation” anything but.