By Kaanita Iyer

(CNN) — President Donald Trump said Friday that the Small Business Administration will absorb the Department of Education’s massive student loan portfolio as he seeks to dismantle the agency and shift more power over education to the states.

“I’ve decided that the SBA, the Small Business Administration, headed by Kelly Loeffler, a terrific person, will handle all of the student loan portfolio,” Trump told reporters in the Oval Office on Friday, adding that the Department of Health and Human Services will take the lead on funding efforts for students with special needs.

The news, which Trump alluded to on Thursday, came after longstanding uncertainty around the future management of the immense student loan portfolio – which is larger than all but three US banks.

The transfer plans come as significant cuts are expected at the SBA – with Loeffler also announcing Friday that the agency is cutting around 43% of its workforce, or about 2,700 positions.

CNN previously reported that the Education Department has struggled to find a viable alternative agency to manage its massive student debt portfolio, according to two sources involved in the discussions. The loan portfolio totals a staggering $1.8 trillion in debt, the sources said, up from what CNN has previously reported based on publicly available information.

Trump had previously suggested that the portfolio would be transferred to the Treasury Department or Small Business Administration.

The president floated earlier this month that Loeffler “would really like” the portfolio, but conversations about a possible move had not moved forward, one of the sources involved with discussions previously said. Instead, the Office of Federal Student Aid for several weeks had been working on a plan to transfer a portion of the portfolio to Treasury, which did not materialize.

The announcements come a day after conflicting messaging emerged from the White House around the future management of key functions of the Department of Education.

Hours before Trump signed an executive order on Thursday directing Secretary Linda McMahon to begin dismantling the Department of Education, White House press secretary Karoline Leavitt said the agency would retain the student loan portfolio.

But as Trump signed the order, the president said the work of the department would be preserved and redistributed among other agencies, though he didn’t specify which ones.

With efforts to dismantle the Education Department underway and the SBA set to absorb the student loan portfolio, management of the critical aid faces an uncertain future.

With dramatically fewer staff, the SBA will now oversee a portfolio in which roughly 40% of the loans are behind in payment, according to people familiar with the data.

The SBA “is prepared to work with Congress and the Administration to bring accountability back to America’s student loan program,” Loeffler said in a post on X on Friday, citing the agency’s experience as “the government’s largest guarantor of business loans.”

Experts warn that an avalanche of new defaults could be approaching as borrowers come to terms with the end of a multi-year pause on loan payments and changes to more affordable payment programs.

“It’s a tidal wave coming for an unprepared village,” one former senior Education Department employee who departed recently previously told CNN. “The fallout is not even hypothetical now.”

This story has been updated with a statement from Loeffler.

CNN’s Kayla Tauche contributed to this report.

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