Education Policy in Congress: A Week of Executive-Legislative Tension, Student Loan Overhaul, and Pell Grant Anxiety

The big picture: Three storylines dominated education policy on Capitol Hill this week. The Trump administration is pressing ahead with dismantling the Department of Education by moving employees to other agencies — despite Congress explicitly prohibiting it in the latest spending bill. Meanwhile, negotiated rulemaking wrapped up on the massive student loan changes enacted under the One Big Beautiful Bill Act, with major new rules set to hit borrowers by mid-2026. And a growing $5.5 billion Pell Grant shortfall is raising alarms about the future of student financial aid policy for millions of low-income students.

The Fight Over the Department of Education's Future

The most consequential education battle in Washington right now is not about a bill — it's about whether the executive branch can effectively dismantle a Cabinet agency that Congress has explicitly funded and ordered to stay intact.

Between 40 and 50 Department of Education employees were detailed to the Department of Labor this week through interagency agreements, according to Federal News Network. This happened even though the FY2026 spending package included language barring agencies from using funds to relocate offices or employees.

The tension is straightforward: Congress passed education appropriations that fully fund the Department. The administration is treating that as a suggestion.

Rep. Bobby Scott (D-VA), the ranking member of the House Education and Workforce Committee, accused the Department of offloading core responsibilities through "legally dubious interagency agreements," according to Government Executive. The American Federation of Government Employees Local 252 went further, calling the moves "unlawful" and saying Secretary McMahon "is unlawfully dismantling the Education Department by moving offices to other federal agencies despite a clear warning from Congress."

The Education Department's response: the appropriations bill "does not preclude the department from partnering with better-positioned federal agencies."

That legal interpretation is likely headed for courtrooms. But in the meantime, the practical effect is that federal education programs — from student aid processing to civil rights enforcement to K-12 education legislation oversight — are losing the people who administer them.

Bloomberg mapped out the step-by-step dismantlement, showing how the administration is using a combination of workforce reductions, interagency transfers, and reorganization to hollow out the Department without waiting for Congress to formally abolish it.

This also comes against the backdrop of Congress passing a budget that rejected the Trump administration's proposals to slash billions from federal education programs, a bipartisan pushback that preserved funding levels for key programs — making the executive branch's end-run around appropriations all the more striking.

On the lobbying front, major players are engaged. Apple Inc. disclosed $2,840,000 in Fourth Quarter 2025 lobbying that included education programs and coding initiatives. Ohio Christian University reported $200,000 in Fourth Quarter 2025 lobbying focused on STEM and nursing education funding — the kind of institution-level advocacy that depends on a functioning Department of Education to process grants and oversee programs.

The key question now: whether congressional leaders will escalate beyond appropriations language and pursue oversight hearings or legal action to enforce their funding directives.

Student Financial Aid Policy Gets a Massive Rewrite

The Department of Education concluded its negotiated rulemaking session this week to implement the student loan provisions of the One Big Beautiful Bill Act, according to a Department press release. The RISE (Reimagining and Improving Student Education) Committee reached consensus on the full package.

The changes taking effect July 1, 2026, are substantial:

• Elimination of Graduate PLUS loans, which currently let graduate students borrow up to the full cost of attendance.
• New lower borrowing limits for graduate unsubsidized Stafford Loans.
• A "Gainful Employment for All" accountability metric that could strip federal loan eligibility from programs failing outcomes tests — applying not just to for-profit colleges but to all institutions.
• A new Repayment Assistance Plan (RAP) replacing the current maze of income-driven repayment options with a single simplified structure.

Under Secretary of Education Nicholas Kent said the rules will "hold universities accountable for outcomes and put significant downward pressure on the cost of tuition."

The scope of affected stakeholders is enormous. NASFAA is tracking implementation through a dedicated web center, and NAICU published a detailed FAQ for private colleges navigating the changes. Harvard's Student Financial Services office published its own breakdown of the key changes for current students.

The gainful employment expansion is the provision generating the most anxiety in higher education. Previously, gainful employment rules applied primarily to for-profit institutions. The new "Gainful Employment for All" standard means that programs at public and private nonprofit universities could also lose access to federal student aid if graduates' debt-to-earnings ratios exceed certain thresholds.

For-profit institutions like the University of Phoenix, DeVry University, and Stride, Inc. have long been at the center of gainful employment debates. But the expansion now puts traditional universities on notice as well. The Association of American Universities, the American Council on Education, and the National Association of Independent Colleges and Universities are all closely monitoring the rulemaking.

Student loan servicers — including Navient, Nelnet, and Sallie Mae — face operational overhauls to implement the new RAP structure. United Continental Holdings Inc. also disclosed $1,490,000 in Fourth Quarter 2025 lobbying that included pilot and aircraft mechanic training education programs, reflecting how workforce-connected education programs are watching the new accountability standards closely.

Career Education Colleges and Universities, the trade group representing for-profit institutions, has historically lobbied on gainful employment definitions and Title IV eligibility — issues now at the center of the rulemaking.

The rulemaking reaching consensus means these provisions are on track for the July 2026 deadline. Congressional opponents would need to act through the Congressional Review Act or new legislation to alter the trajectory — and no such effort has materialized.

The Pell Grant Shortfall and What It Means for Education Appropriations

A quieter but potentially more consequential story: the Pell Grant program faces a $5.5 billion shortfall, and Congress has not signaled how it plans to address it.

The maximum Pell Grant has been frozen at $7,395 since the 2023–24 academic year. College costs have not frozen. The gap between what the program provides and what students need continues to widen.

The shortfall is structural. Pell Grants are funded through a combination of discretionary appropriations and a mandatory add-on. When the mandatory portion was established, it was designed to supplement annual congressional funding. But as costs have risen and enrollment patterns have shifted, the surplus that once existed in the program has evaporated.

Advocates — including NASFAA, the National Association of Student Financial Aid Administrators, and the American Association of Community Colleges — have long pushed to make the Pell Grant a fully mandatory spending program, removing it from the annual appropriations process. That would insulate it from the kind of year-to-year uncertainty that currently defines the program.

The political dynamics make a fix complicated. The One Big Beautiful Bill Act already made sweeping changes to student financial aid policy through the reconciliation process, and there is limited appetite in Congress for another major education spending bill in the near term. The Elementary and Secondary Education Act and its various reauthorizations have historically served as vehicles for broad education policy changes, but no such reauthorization effort is currently moving.

Meanwhile, the institutions most dependent on Pell Grant funding — community colleges and minority-serving institutions — serve the students least able to absorb a funding cut. If Congress does not act and the shortfall forces eligibility changes or award reductions, the impact would fall disproportionately on low-income and first-generation college students.

No hearings on the Pell shortfall were scheduled this week, and no new legislation addressing it was introduced. The House Education and Workforce Committee's subcommittee on Early Childhood, Elementary, and Secondary Education did hold a hearing titled "Building an AI-Ready America: Teaching in the AI Age" — reflecting the committee's current focus on technology rather than appropriations.

Sen. Adam Schiff's visit to the Guadalupe Early Learning Center in California this week highlighted federal investments in early childhood education — a reminder that the entire spectrum of federal education programs, from Head Start through Pell Grants, depends on congressional willingness to fund them.

The bottom line: The Pell Grant shortfall is a slow-moving crisis that lacks the drama of the Department of Education fight or the complexity of student loan rulemaking. But for the roughly 7 million students who depend on Pell Grants each year, it may end up mattering more than either.

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