The U.S. Department of Education (ED) is in a state of upheaval since the beginning of the new presidential administration, leaving higher education institutions (colleges), financial aid administrators, and current and prospective college students wondering what the future holds.
In this guideWhat are the concerns?
President Trump kicked off this Financial Aid Awareness Month with an announcement Feb. 4 that he planned to dismantle ED via executive order. However, an executive order would not be sufficient to accomplish this. He needs Congress to follow his lead and hold a vote to eliminate ED, but with a Republican majority in both the House and the Senate, it’s a real possibility.
If ED is dismantled, that by itself will not threaten the existence of federal education grants such as Pell, because they were created by the Higher Education Act (HEA) and do not require ED for administration. However, ED has been administering those federal grants since the 1970s when they were created, first as a part of the Department of Health, Education, and Welfare, and then as an independent department beginning in 1980. So, if essential ED functions are transferred to the U.S. Department of Treasury or another federal agency, grants would continue, theoretically, after what would likely be a rough transition.
Dismantling ED leaves direct student loans and parent PLUS loans in question because administration of those loans is specifically assigned to the Secretary of Education. If his pick for Secretary of Education, Linda McMahon, “put(s) herself out of a job” as Trump requested, what will happen to these student loans? The HEA does not address that possibility, so even experts don’t know the answer to this question.
In addition, the HEA is overdue for reauthorization by Congress, and Congress may adjust federal grants during reauthorization. Whether those federal grants are in jeopardy of being decreased or eliminated is another unanswered question.
Right now, many of these concerns are theoretical because of this unprecedented situation, but colleges and financial aid administrators are on the alert, trying to ascertain worst-case scenarios and brainstorm ways to mitigate them.
What you can do as a student or parent
So, with all of this going on, how can a student, prospective student, or their parent(s) try to prepare for the changes that may come?
Stay informed
The key will be staying informed. This situation will likely change frequently. Even now, judges have blocked certain actions and states have filed lawsuits, and there’s no way to predict exactly how it will all turn out. If you don’t read the news, try following ED, your state department of education, non-profit educational or professional organizations, and your college or prospective college on social media, so that you have the most up-to-date information available.
Dismantling ED and the possible disruption or elimination of federal student aid will have a profound effect on states and colleges. Both will suffer if students cannot start or continue college due to funding shortages, therefore, states and colleges will likely try to step in with additional funding or tuition discounts, if they can, to try to counter any federal aid shortage.
Grants
While federal student loans are most at risk right now, grants and scholarships from any source are always preferable to loans.
Most states already have education grants. Watch your state’s department of education website for any additional grant opportunities that may open up. In addition, watch your educational institution’s web site and speak regularly with its financial aid representatives about other possible opportunities for grants and scholarships.
Search for scholarships
While scholarship search engines are already available, they may become increasingly important if federal aid shrinks. It’s quite possible that organizations will increase scholarship amounts or make application processes easier in light of current events. In your search for scholarships, be sure to use legitimate scholarship engines. Unfortunately, there are scholarship scams out there. Remember, you should never have to pay to apply for, or receive, a scholarship.
Scholarship search engines are wonderful because they ask you a variety of questions about your background, career goals, and funding needs to find the scholarships that are best for you. Some long-standing and well-known scholarship engines include:
- Fastweb.com
- Scholarships.com
- BigFuture.com,
- Scholarships360.com, and
- The U.S. Department of Labor’s scholarship search engine, Careeronestop.org
There are other scholarship search engines available too, and new scholarship search engines are popping up all the time. Scholly.com was featured on the television show “Shark Tank” 10 years ago and is now owned by SallieMae.
Affordable Degree Guide also has its own scholarship guide here.
Meanwhile, don’t forget about the scholarships offered by your local organizations, which can be found with a web search with keywords such as “local scholarships for college students” or “local organizations that offer scholarships.” Again, be wary of scams.
Talk to your high school counselor, if applicable, and the financial aid office at your college. They see many of the external scholarships that students get and may be able to advise you about which scholarships are easiest to receive at their college. They will also be able to tell you about their own institutional scholarships.
Loans and payment plans
Federal student loans may be most at risk for elimination or interruption if ED is dismantled. While federal student loans have gotten a lot of bad press lately because students have accumulated enormous debt, they are still much easier to get than private loans and frequently have lower interest. They do not require a credit check, and they also offer benefits such as deferred repayment and income-driven payment plans.
If federal student loans are discontinued or interrupted, students may need to search for private education loans. In recent years, some good private education loans have been available via College Ave and SallieMae, but there are many other private education loan resources, both online and at your bank or credit union.
One disadvantage of private loans is that they are credit-based. Students with no credit history or negative credit history will find it more difficult to obtain private education loans, and they may need a cosigner to assist them. However, for those who have good credit, interest rates may be lower than what they would have received on federal student loans.
When it comes to private student loans, shop carefully and compare. You will need to be proactive in looking for the lowest interest rates and any benefits the various private education loans may offer. Some may offer deferred repayment, while others may not. Make sure you know what you are getting into.
Another disadvantage of using private lenders is that they are private companies who want to make a profit. While some companies may reduce credit check requirements or interest rates to help students stuck in federal-financial-aid limbo, others may see it as an opportunity to make more money and increase interest rates instead.
Some colleges offer private loans or payment plans. Make sure to keep in touch with your financial aid representative to see if the best deal is with them. They may also recommend certain private loans from outside companies.
Credit cards
Some students and parents will be tempted to use credit cards to help pay for a funding shortfall. Many credit cards have very high interest rates, so generally, using credit cards for this is inadvisable. Avoid using a credit card unless you are sure they have an interest rate that is comparable to any private student loan you could be receiving.
Sometimes credit cards have a low introductory interest rate for the first six months, after which they raise the rate, sometimes to staggering heights. If you are using a credit card for its low introductory rate, know what the rate will become after six months and plan ahead to pay off or transfer that balance to a more affordable option before the interest rate increases to an unmanageable level.
Sources
- Executive order to shut Education Department | Source Reuters in Feb 2025
- 2025 Trump Administration Transition | Source ACE in Feb 2025
- How 4 of Trump’s policy actions could impact higher ed | Source Higher Ed Dive in Feb 2025
- Trump’s plan to freeze federal grants | Source Higher Ed Dive in Feb 2025
- 5 Ways the Education Department Affects Higher Ed | Source Higher Ed Dive in Feb 2025
- Trump admin’s latest effort to dismantle Education Dept | Source NASFAA in Feb 2025
- Scholly shark tank update | Source SharkTankBlog in Feb 2025