New Delhi, April 27 -- The Trump administration has handed the US Treasury Department its first major test in reshaping the country's vast $1.7 trillion student loan system, starting with the most troubled segment-defaulted loans. Under a new agreement, Treasury will take over management of roughly $180 billion in overdue debt affecting more than 9 million borrowers, marking a significant shift in federal loan oversight and a key step in President Donald Trump's push to dismantle the Education Department.

While only Congress can formally dismantle the department, the administration is pursuing incremental changes through inter-agency agreements.

Officials argue the Treasury Department is better equipped to manage overdue loans due to it...