The recent executive order signed by President Trump, authorizing what is essentially a heavy dismantling of the Department of Education, is supposed to be about saving the taxpayers money and returning power to the states. Diving deep into the numbers, it looks like if the E.O. is carried out to the most extreme limits, it would end up COSTING taxpayers about $17 billion more per year. Due to what is typically funded or administered by the DOEd, it’s likely that the quality of education across the U.S. would actually decline, the exact opposite of what proponents are claiming.
For 2024, the U.S. Department of Education’s budget sat at approximately $202 billion, of which around $143 billion was disbursed directly to students/colleges as loans and grants. Without funding from the DOEd (and Federal tax revenues), this shortfall would have to be made up from state budgets. No state currently has enough of a budget surplus to cover what would be their share of this $143 billion. This would be a likely rise in state taxes (for all income levels), a reduction in student aid/loans and a further loss of on-campus jobs, not to mention the ripple effect from declining student bodies.
Any claims of savings to taxpayers typically take the form of reduced taxes or reduced borrowing. This will almost certainly not happen as, at best, taxpayers can hope to see a permanent extension of the TCJA.
While most of the grant/loan shortfall would be made up through the states (and indirectly through a significant slowdown in rising tuition/housing rates), the administration of the now expanded programs would fall to state education departments. While this could save a small sliver of money (it costs about $3.3 billion to administer the DOEd vs. what would be an approximately $1.5 billion in expanded state administrations), it also opens up transparency and accountability issues. Instead of one centralized department which can be tracked/audited relatively easily, you would now have 50+. That’s 50 times the chances of actual waste going unmonitored, or funds being misappropriated.
States would also be forced to come up with more money for special education programs and supplementing schools in low-income areas. Most states would likely come up with some of the money (increased direct/indirect taxation) needed to continue to fund these line items how they are now. What would also be very likely is forced consolidation/shut-down of schools, leading to increased class sizes, longer commute times and to a further degradation of already abysmal academic performance in some areas.
Extrapolating from current U.S. state/local education budgets (~$760 billion in 2024), states would need to raise their education budgets about 28% just to keep the status quo. This would not hit states evenly as a state like Mississippi would need to come up with more money as a percentage of their budget compared to a state like Vermont. The inevitable reduction in schools and staff would curtail the 28% increase, though likely by no more than an extra 5%. Add on to all of this the fact that student loans is a money-loser for the Federal government in real terms as defaults are far higher than projected in 2000. State budgets would be forced to eat these costs or set stringent guidelines for borrowers, which would likely hit the lowest-income individuals the most.
Although there would be a slight savings in administration and possibly loan disbursements, the economic impact of fewer people going to college (and their lack of earning/spending power) along with the probably rise in taxes would equal about a 5% increase in educational costs from the taxpayers. This translates to about an extra $11 billion a year spent to have fewer resources for students going to college, reduced special education programs and larger class sizes.
