Federal Update - March 25

March 25, 2026

GOVERNMENT RELATIONS HIGHLIGHTS

Potential DHS Deal Emerges: Possible end to TSA disruptions 

ED on the Move: Part of student loan portfolio to Treasury 

ED Delays New Financial Reporting: Cites limited resources in delay 

POTENTIAL DHS DEAL EMERGES AS TSA DISRUPTIONS MOUNT

What You Need to Know 

Following a lapse in appropriations in early February, the US Department of Homeland Security (DHS) has been partially shuttered for 40 days. The shutdown stems from an impasse between congressional Democrats and the White House over proposed ICE reforms after fatal shootings by ICE agents in Minnesota earlier this year. The prolonged funding lapse has led to severe staffing shortages at TSA, resulting in long security lines and growing frustration among travelers at airports nationwide. While both parties have remained firm in their positions, mounting pressure from the travel disruptions appears to be driving renewed conversations on Capitol Hill this week. 

Why This Is Important 

Though still preliminary, reports suggest Senate Republicans and Democrats, with support from President Trump, are exploring a path forward that would fund most DHS agencies, including TSA, FEMA, and the plethora of other agencies under the department, while temporarily delaying funding for ICE. Republicans would then seek to fund ICE separately through the reconciliation process, potentially attaching elements of the SAVE Act, the partisan election legislation that is currently the top legislative priority for the White House. While significant hurdles remain, momentum toward at least a partial resolution appears to be building. 

ED ADVANCES DISMANTLING PLAN BY SHIFTING STUDENT LOANS TO TREASURY

What You Need to Know 

As part of the Trump Administration’s broader effort to dismantle ED, the Trump Administration announced last week that it has entered into an interagency agreement with the US Department of the Treasury to administer the federal student loan portfolio, which totals approximately $1.7 trillion and is currently overseen by the Office of Federal Student Aid. Under the agreement’s initial phase, Treasury will assume responsibility for the collection of defaulted student loans. Future phases could expand Treasury’s role to include broader loan servicing functions and oversight of additional FSA programs. 

Why This Is Important 

While closing ED outright would require congressional approval, the Administration continues to pursue the alternative strategy of redistributing departmental responsibilities. Litigation challenging the legality of previous interagency agreements remains ongoing, and this Treasury transition may face similar scrutiny. It is unclear when Treasury may assume responsibility for nondefaulted loans, let alone other FSA functions. AACS will keep its members up to speed on these developments. 

ED DELAYS ENFORCEMENT OF NEW FINANCIAL REPORTING REQUIREMENTS

What You Need to Know 

On October 31, 2023, ED published a final rule addressing a number of financial responsibility, administrative capability, and other provisions that became effective on July 1, 2024.  Among these new provisions was a requirement that audited financial statements submitted to ED for fiscal years beginning on or after July 1, 2024 to match the fiscal year end of the entity’s annual tax return(s) filed with the IRS. In a March 20, 2026, Electronic Announcement, however, ED announced that it will not prioritize enforcement of this requirement until at least fiscal years beginning on or after July 1, 2027. ED also announced institutions would not need to add a specific financial statement note disclosing when there are no related party transactions until at least July 1, 2027 because this requirement will not be an enforcement priority for ED prior to that date.  

Why This Is Important 

ED explained the reasoning for these reordered enforcement priorities, stating it “would not be appropriate due to our limited resources nor would taking action advance the national interest or the policy priorities of ED.” Institutions should confirm their auditors are aware of this new guidance, and they should keep in mind that this guidance does not relieve institutions of their obligation to timely submit annual audited financial statements and Title IV compliance audits to ED.  

For More Information

If you have any questions about this Update, please email info@myaacs.org.