Students and families have lots of questions about what might happen to college financial aid given the turmoil at the U.S. Department of Education and deep federal budget cuts expected for next year.
What will happen to the FAFSA? Will I get financial aid? Will I be able to pay for college?
We recently returned from Washington, D.C. on a trip organized by the National College Attainment Network. Here’s what website founder Kim Nauer learned from our visit to Capitol Hill, originally published in an interview by CNYCA’s Urban Matters.
The Education Department’s Role
Question: Kim, there’s certainly a lot of confusion about the future of the U.S. Department of Education right now. I know you were in Washington earlier this month looking for some answers. But first: For those who haven’t gone through the process – or who have blissfully forgotten what it can be like – can you summarize what the department does to help students pay for college?
Kim Nauer: Sure. The Education Department plays a pivotal role helping students pay for school, offering grants and loans to make colleges and trade schools more affordable.
This is done through the office of Federal Student Aid, which disburses some $121 billion to 10 million students every year. Students get access to billions more by filling out the Free Application for Federal Student Aid, or FAFSA. The form unlocks federal, state, and college aid plus many need-based scholarships. Some 17.6 million students apply online annually.
Federal Student Aid has also been responsible for managing the nation’s $1.6 trillion student loan portfolio – a massive task – and overseeing colleges that must obey a labyrinth of regulations in order to receive and disburse federal aid. All of this work is now in question.
How Layoffs Will Affect Students
Question: President Trump signed an executive order in March aiming to abolish the Education Department, which was established by law in 1980. Leaving aside big questions about that order’s legality, recent layoffs and resignations have left DOE with about half the staff it had three months ago. What does this mean for students?
Kim Nauer: There’s a lot to worry about. The good news is that the FAFSA is in much better shape after last year’s legendary botched rollout of what was meant to be a more user-friendly application process. Education Department officials say they are committed to supporting the FAFSA and the technologists who were credited with this fall’s successful relaunch.
Still, the FAFSA is vulnerable in a department that the U.S. Education Secretary Linda McMahon remains committed to shutting down. Its website went dark for more than half a day shortly after the agency layoffs. Teams that oversee the department’s contractors – including those that staff the FAFSA’s help desk – have been gutted. Federal Student Aid depends on an eco-system of people who work closely with students and colleges. Observers say we may be in for “a slow-rolling disaster.”
Student Loans in Limbo
Question: So, what’s going to happen to the Department of Education’s huge student loan portfolio? Who is going to manage that?
Kim Nauer: We’re not sure. There are 43 million borrowers – and a record number are starting to fall behind on their payments as the program ramps back up after a long Covid-related hiatus.
President Trump initially suggested that the Small Business Administration could take on that shaky debt, but Congress is pushing back, arguing that the Department of Treasury would be better suited for the work.
This certainly made sense in March, given that Elon Musk’s Department of Government Efficiency gored SBA with the same vigor as it did the Education Department, cutting 43 percent of the SBA’s workforce. But today, leadership at Treasury seems to be quite busy, scrambling to calm the markets in the wake of President Trump’s tariff gyrations and dealing with a revolt at the Internal Revenue Service over attempts to use highly confidential records to deport undocumented taxpayers. For the moment, Federal Student Aid is still on the job.
Money Needed for Pell Grants
Question: There’s also the matter of the federal budget covering the next fiscal year, starting Oct. 1st. The president and the Republican majorities in Congress want big tax cuts, accompanied by deep spending reductions. What’s the outlook for federal scholarships and loans?
Kim Nauer: Another tough one. President Trump’s “Big Beautiful Budget” calls for $450 billion in tax cuts every year from 2025 to 2034, adding up to $4.5 trillion over 10 years. That’s a lot of money. Congress is required to find savings to cover it. Education, health, and poverty programs are in the crosshairs. Democrats fight for these priorities, but Congress will be using a budget process that has stripped their party of all power.
Unfortunately, the federal Pell Grant program is underwater. Pell, which is designed to aid students with exceptional financial needs, is down by $2.7 billion to meet current demand. Advocates are asking for $10 billion to meet future demand. Funds are also needed to help pay for a Republican wish list, which would allow grants to be used for workforce and part-time college programs.
Believe it or not, $10 billion is a tiny amount of money in the context of the federal budget. Mere “budget dust” as some like to say. Students and families should work both sides of the aisle to protect Pell. Pell is popular in Congress.
Advice to Students and Families
Question: Last question. The headlines about funding cuts and images of DOGE master Elon Musk dancing around with a chainsaw must just add anxiety to what’s already a pretty nerve-wracking experience. So what advice are you giving college-eligible students and their families in light of that?
Kim Nauer: This is a lot of stress. Stay focused on finding a good school that you can afford. And don’t follow the example of our current and past lawmakers. Spend within your means. Keep your debt manageable. Your education will be worth the time and the cost.
Kim Nauer is founder of this website and a higher education expert at the Center for New York City Affairs at The New School. She is a graduate of UConn and the Columbia Journalism School, which were cheap in the old days. Her advice: Don’t overpay for college. There are always options.