Department of Education Budget: Aid, Schools, and Proposed Cuts

The Department of Education’s budget for fiscal year 2026 totals roughly $77.2 billion, combining about $66.7 billion in discretionary appropriations that Congress votes on each year and about $12.9 billion in mandatory spending that flows automatically under permanent statutes.¹ That headline number understates the department’s financial reach, because it also administers $1.7 trillion in outstanding federal student loans held by 42.8 million borrowers, and it originates new loans each year outside the appropriations count.²

Where the Money Goes

Three programs consume roughly 96 percent of the department’s discretionary budget. Pell Grants for low-income undergraduates get $30.6 billion. Title I grants for high-poverty schools get $18.4 billion. IDEA special education grants get $14.9 billion.¹ Everything else the department does, from career training to civil rights enforcement to grants for minority-serving colleges, competes for the remaining sliver.

Student Financial Aid

Federal Student Aid, an office inside the department, awards more than $120 billion a year in grants, work-study funds, and low-interest loans.³ The two big engines are Pell Grants and the William D. Ford Federal Direct Loan Program, which issues subsidized and unsubsidized loans along with PLUS loans for parents and graduate students.

Pell Grants

The maximum Pell Grant for the 2026–2027 award year is $7,395, unchanged from the prior year. Under the Higher Education Act, that maximum equals a statutory base of $1,060 plus an additional amount Congress specifies in the annual appropriations bill.⁴ Pell Grants do not have to be repaid, and eligibility is determined through the FAFSA based on financial need. Because part of the program is mandatory, total Pell spending can exceed the discretionary appropriation when enrollment rises.

Direct Loans and the SAVE Plan

Federal Direct Loans make up the vast majority of the $1.7 trillion outstanding portfolio.² Because the program runs on mandatory authority, new loans are issued to every eligible FAFSA applicant even when appropriations are delayed.

The SAVE income-driven repayment plan, which had enrolled more than 7 million borrowers, was struck down by the U.S. Court of Appeals for the Eighth Circuit in March 2026. Borrowers had been placed in forbearance during the legal challenge, with interest still accruing. They now need to switch to another repayment plan, such as Income-Based Repayment, to resume progress toward forgiveness or keep balances from ballooning.

K–12 School Funding

Federal dollars account for about 11 percent of total K–12 public school revenue, with state and local sources covering the other 89 percent.⁵ That share is small in aggregate but concentrated in the districts that need it most.

Title I

Title I of the Elementary and Secondary Education Act is the department’s largest K–12 program at $18.4 billion for fiscal year 2026.¹ Money flows to school districts with high concentrations of children from low-income families through a formula built on census poverty data and local per-pupil spending. The formula approach makes funding predictable year to year, which helps districts plan staffing and tutoring rather than chase competitive grants.

Impact Aid

The budget also includes $1.6 billion for Impact Aid, which compensates school districts that lose property tax revenue because of tax-exempt federal land within their boundaries, such as military installations, tribal lands, or national parks.¹

The End of Pandemic Relief

Between 2020 and 2021, Congress provided roughly $190 billion in Elementary and Secondary School Emergency Relief (ESSER) funds. Districts used the money for staff, ventilation upgrades, tutoring, and mental health programs. The final round had to be obligated by September 2024, with a late liquidation window extending through March 2026 for approved extensions.⁶ Districts that used one-time federal money for recurring costs like salaries are now facing cuts, and low-income districts have the least local revenue to fill the gap.

Special Education Under IDEA

The Individuals with Disabilities Education Act requires states to provide a free appropriate public education to every eligible child with a disability and authorizes federal formula grants to help pay for it.⁷ For fiscal year 2026, IDEA Part B Grants to States received $14.9 billion, with another $540 million for Part C early intervention services for infants and toddlers.¹

When Congress passed IDEA, it committed to covering up to 40 percent of the average per-pupil cost of educating children with disabilities. Federal funding has never come close, hovering closer to 15 percent. States and districts absorb the difference, which is why special education is a persistent budget pressure at the local level. To receive IDEA funds, states must show that federal dollars supplement rather than replace their own spending; states that fail to maintain effort can lose their allocation.

Higher Education Institutional Support

Beyond aid to individual students, the department funds programs that support institutions and expand access.

Minority-Serving Institutions

Title III of the Higher Education Act authorizes grants to Historically Black Colleges and Universities to strengthen academic programs, administrative capacity, and physical infrastructure.⁸ Title V provides similar support for Hispanic-serving institutions. The fiscal year 2026 budget includes $823 million for institutional development grants and $356 million for Hispanic-serving institutions.¹ These programs draw on both discretionary and mandatory funding, with the mandatory portion extended through the FUTURE Act.

TRIO and GEAR UP

TRIO covers eight outreach programs designed to help low-income individuals, first-generation college students, and students with disabilities move through the academic pipeline from middle school through graduate programs. GEAR UP provides six- to seven-year grants to states and partnerships serving high-poverty middle and high schools, following whole cohorts of students from seventh grade through high school graduation and providing college scholarships to low-income students.⁹ Both fund institutional grants rather than direct payments to students, which makes them more vulnerable to budget cuts than Pell Grants. The administration’s fiscal year 2027 budget proposal would eliminate TRIO entirely.

Career and Technical Education

The Strengthening Career and Technical Education for the 21st Century Act, known as Perkins V, provides nearly $1.45 billion a year in formula grants to states for career and technical education programs.¹⁰ These funds support high school and community college programs that prepare students for skilled trades, health care, information technology, and other in-demand fields. The fiscal year 2026 budget also includes $4.6 billion for vocational rehabilitation state grants, which help people with disabilities prepare for and find employment.¹

Proposed Cuts and Restructuring

The department’s 2026 budget cannot be discussed apart from the effort to reshape or dismantle the agency. Beginning in early 2025, the department cut its workforce by roughly half through layoffs, voluntary separations, and terminations of probationary employees. The administration has signed interagency agreements to transfer billions of dollars in grant programs to the Departments of Labor, Interior, State, and Health and Human Services. Labor is slated to take over federal funding for K–12 schools, including Title I grants.

Congress pushed back. The fiscal year 2026 spending package that ultimately passed increased funding for the department and rejected the administration’s proposed deep cuts. Whether the program transfers proceed despite that resistance is an open legal and political question.

The administration’s fiscal year 2027 request proposes $76.5 billion for the department, a $2.3 billion cut from 2026 levels. That proposal would eliminate the Federal Supplemental Educational Opportunity Grant, drastically reduce federal work-study, and end TRIO programs.¹¹

How the Budget Gets Made

The annual process starts with the President’s Budget Request, which by law must be submitted to Congress between the first Monday in January and the first Monday in February.¹² That document lays out the administration’s priorities for the fiscal year beginning October 1, but it is a proposal, not a law. Congress can ignore it. The House and Senate Appropriations Committees hold hearings, question department officials, and draft their own spending bills; if the chambers pass different versions, a conference committee reconciles them.

When Congress fails to pass a budget by October 1, it typically passes a continuing resolution that holds programs at their previous levels. During an actual lapse in appropriations, the department’s contingency plan keeps critical functions running: Pell Grants and Direct Loans continue to be disbursed, and Title I and IDEA grant funds already awarded remain accessible to schools.¹³ New grant competitions stop, and the Office for Civil Rights pauses its complaint investigations until funding resumes.

1
U.S. Department of Education. Fiscal Year 2026 Budget Summary
2
Federal Student Aid. Federal Student Aid Posts Updated Reports to FSA Data Center
3
U.S. Department of Education. Federal Student Aid
4
Office of the Law Revision Counsel. 20 USC 1070a – Federal Pell Grants Amount and Determinations
5
National Center for Education Statistics. COE – Public School Revenue Sources
6
Congress.gov. Late Liquidation Period for Elementary and Secondary Education Emergency Relief Funds
7
U.S. Department of Education. Individuals with Disabilities Education Act (IDEA)
8
U.S. Department of Education. Title III Part B Strengthening Historically Black Colleges and Universities Program
9
U.S. Department of Education. Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP)
10
U.S. Department of Education. Perkins V
11
The White House. Budget of the United States Government Fiscal Year 2027 – Department of Education Appendix
12
The U.S. House Committee on the Budget. Time Table of the Budget Process
13
U.S. Department of Education. U.S. Department of Education Contingency Plan for Lapse in Fiscal Year 2026 Appropriations