This ukase by President Trump, like many of his executive orders, gave little thought to the governmental functions that were being eliminated or compromised. In the case of the USDOE, Trumpian animus was principally directed at the government’s relationship with American schools, but for higher education the relationship antedated the creation of the Department in 1979. It administers federal student financial aid, as authorized in Title IV of the Higher Education Act of 1965 and significantly expanded in 1972—principally, Pell Grants based on financial need ($39 billion in FY2025) and student loans ($92 billion in annual direct student loans, and $1.6 trillion in loans outstanding). These funds are a fiscal bedrock of American higher education in the twenty-first century, upholding institutional finances and student affordability. But they have not always been well designed or competently administered. Why this has been the case is not readily evident. The Department is staffed by civil servants with job protection (supposedly) and largely Democratic sympathies. Under the presidentially appointed secretary of education are fifteen political appointees that also require confirmation by the Senate, and the secretary hires other personnel as well.Footnote ² The USDOE often has some latitude in its actions, but only within the laws and regulations set by Congress and the wishes of the Administration. Thus, the actions of the USDOE have many inputs.

The current system of federal student financial aid stems from the 1972 amendments, which were some of the most consequential federal actions for higher education since the Morrill Act (1862). Congress was concerned above all with expanding educational opportunity. It authorized four kinds of grants based on financial need; of them, what were later named Pell Grants were the most important. As a backup, the Student Loan Marketing Association (Sallie Mae) was created to provide liquidity for banks to offer guaranteed student loans. In 1972, universities were still tainted by the previous decade’s disorders. Hence, support was directed to students, not institutions. An influential report was critical of traditional higher education, advocating non-college alternatives. Higher education became “postsecondary education,” and students in proprietary (for-profit) vocational or career colleges were made eligible for student aid.Footnote ³

This had been tried once before. The 1944 GI Bill provided support for all kinds of vocational and on-the-job training, and three-quarters of participating veterans took these paths. The extent of fraud in these courses was considerable—an estimated one-third of total expenditures. The Veterans Administration ceded control to state departments of education, which lacked monitoring capabilities. Scams were occasionally publicized in the popular press, but it was not until 1950 that a congressional investigation exposed these practices.Footnote ⁴ Two decades later, the spirit of larceny was rekindled by the easy pickings of Pell Grants (other grant aid was tied to the colleges) and soon by guaranteed student loans too. Many of the initial scammers were fly-by-night operations, which closed once they were scrutinized. At one point the USDOE declared 528 of them ineligible. By the 1980s, semi-credible for-profit vocational colleges were able to exploit student aid in multiple campus settings. Concern over these practices grew slowly. Still, in 1986 the for-profits enrolled 2 percent of students and captured 36 percent of federal student aid.Footnote ⁵

When the public had clamored for more student aid, Congress responded with the Middle Income Student Assistance Act (1978). A sop for the middle class, it made Pells more widely available and removed income restrictions on guaranteed student loans. Loan volume doubled in two years before the Reagan administration reimposed income caps. But loan volume did not decline. The 1980s marked the inception of a financial transformation of American higher education—from relatively cheap to expensive. By 2000, in both public and private sectors tuition as a percentage of median family income had doubled—and it did not stop there.Footnote ⁶ Through the 1980s, appropriations for Pell Grants were contested in Congress and grew little, while loans were issued by banks and available to meet rising costs. Loans became the largest form of student aid—and a large preoccupation of Congress.

In 1987, Secretary of Education William Bennett (the bête noir of the academic left for championing Western Civilization) issued a blistering report on the for-profit colleges’ shady practices and exploitation of federal student aid. Only a few determined members of Congress sought to address the situation. Congress’s interest in this issue was dominated by the banking industry, which, with assistance from Sallie Mae, made large, safe profits from guaranteed lending. In the 1992 reauthorization of the Higher Education Act, reformers were able to insert some minimal regulation—requirements that no more than 85 percent of students could be supported by Title IV funds (the 85/15 rule), that no more the 50 percent of instruction could be non-residential (the 50/50 rule, at this juncture aimed at correspondence courses), and that forbade incentive compensation for recruiters.Footnote ⁷

On matters of federal student aid, the influence of the for-profit sector became paramount. In 1991, the Career College Association formed to advance its interests. By making large donations to congressional election campaigns, it quickly became one of the most effective lobbyists in Washington. In one of its first victories, Congress reduced the 85/15 rule to a more lenient 90/10. After 2000, the opportunity for easy profits encouraged the creation of corporate universities with branches across the country. The industry then achieved its full wish list during the presidency of George W. Bush. He appointed a former for-profit lobbyist as assistant secretary for postsecondary education, and higher education policy was shaped by for-profit interests. The USDOE weakened constraints on recruiters, imposed only token fines for blatant violations, and in 2006 the 50/50 rule was dropped. The for-profits quickly instituted fully online programs, which were enormously profitable. For-profit enrollments doubled in five years—to nearly 10 percent of the total—and they garnered 25 percent of Pell Grants, while their students defaulted at high rates on loans. Growth at all costs was their objective, propelled by high-pressure recruiters, making the value of these “growth stocks” soar.Footnote ⁸

Although enrollments were at record levels, public sentiment favored increasing college attendance and affordability. The final years of the Bush administration saw passage of the College Cost Reduction and Access Act (2007). More modest than its title, it raised Pell Grants and created new, income-based loan options. These themes became a central focus of the Obama presidency. Economic stimulus legislation in 2009 expanded the value and eligibility for Pell Grants. It also extended tax credits for college costs—an expensive middle-class benefit that did nothing to increase access. The most audacious step was to federalize federal student loans, removing lending from the banks. Although direct student loans were created in 1993, banks and Sallie Mae still dominated lending (80 percent) and had powerful political influence. The government takeover was passed in 2010 as part of Obamacare legislation, ostensibly to capture the huge profits of the banking industry for student aid and medical care. Rather than being a source of profits, the enormous student loan business became a liability for the federal budget.Footnote ⁹

Outstanding federal student loans were $500 billion in 2007 and ballooned to $1.5 trillion in 2018. Most of the increase occurred during the Obama administration even as the system was becoming more disorganized. There were eight repayment plans with different eligibility requirements, thirty deferment and forbearance options, and fourteen forgiveness possibilities, all administered by eleven different servicers.Footnote ¹⁰

In 2012, a Senate committee under Thomas Harken published a two-year study of the for-profit industry that was even more damning than its predecessors. However, regulation of the for-profit sector was resisted inside and outside Washington. Weak reforms were passed that year, but even these were blocked by industry legal challenges. Nonetheless, consistent harassment by the USDOE broke the growth momentum of the sector, along with waning corporate profits and stock prices. Finally, in 2015, a bill established a “gainful employment” standard of graduates for institutions to be eligible for Title IV funds. This requirement drove a few corporate universities into bankruptcy, others downsized by cutting nonconforming programs, and most reorganized to become less vulnerable. The exploitation of students and federal student aid did not disappear, but it became less overt and siphoned off a somewhat smaller portion of federal student aid.Footnote ¹¹

Unlike the comprehensive, income-based repayment plans for student loans in Canada, England, and Australia, the USDOE administration of federal student aid has been neither comprehensive nor equitable. The financial burden on young graduates (and no-longer-young debtors) is lamented by all concerned and has negative social consequences. This dysfunction has given rise to political calls for loan forgiveness. Initiatives by the Biden administration proposed such windfalls for select groups of borrowers, but loan cancellations were blocked by the courts. The latest in a succession of income-based repayment plans, called SAVE (2023), was extremely generous to borrowers and extremely expensive for the government. However, SAVE was enjoined by the courts for including loan cancellations without legal authority, and the eight million borrowers who signed up for it were placed in interest-free forbearance.Footnote ¹²

The USDOE’s attempt at simplifying the Free Application for Federal Student Aid form, or the FAFSA, was another egregious bungle. The form, which almost all students must submit, was excessively long, complex, and last updated in 1996. Congress at the end of 2020 passed the FAFSA Simplification Act, giving the USDOE two years to fix it. The Department requested and was given a third year, but late in 2023 the new form was still not ready. A preliminary version was rolled out at the very end of the year but was not fully functional in the spring of 2024, when college admissions offices across the country had to prepare student aid offers. These delays were blamed for reduced enrollments in fall 2024. This was clearly mismanagement of a core responsibility. Insiders claimed that they needed more money ($336 million was not enough). Others claimed the USDOE was too preoccupied with forgiving loans to focus on FAFSA. The Biden administration’s appointment of Richard Cordray to head the Office of Federal Student Aid, an influential Democratic insider who had no experience in student aid, was apparently no help. Excuses aside, it seems the inability to complete this straightforward assignment was another USDOE failure.Footnote ¹³

The USDOE has not functioned well in the twenty-first century. Under Bush it tolerated waste, fraud, and abuse; it took the Obama Department seven years to deal with corruption by corporate universities even while blowing out the loan portfolio; the Biden Department, besides the FAFSA fiasco, made the student loan mess messier.Footnote ¹⁴

As of this writing, in the summer of 2025, the Department of Education is still functioning. The new secretary, Linda McMahon, is former president of World Wrestling Entertainment and reputably a tough administrator. Congress made strides to clean up the student aid mess with Public Law 119-21, signed July 4, 2025. Ceilings were put in place on most kinds of loans, and as of 2026 there will be only two types of regular student loans: a Standard Plan and an income-based Repayment Assistance Program. Meanwhile, Secretary McMahon ordered all borrowers, many of whom had not paid anything for three or four years, to begin repayment at once. In addition, congressional hostility toward higher education and the indefatigable efforts of the for-profit lobby produced the first Pell Grant eligibility for students in workforce training programs. Pell Grants are made from a fixed appropriation, so adding a new class of recipients can only mean less for college students. Transitioning to the new student loan programs and monitoring for-profit workforce school eligibility (and honesty) imply an enormous workload for those employees still remaining in the much-diminished USDOE. But perhaps it will ensure that the Department of Education endures in its traditional dependent state, where educational issues of any importance are determined by Congress or the presidential administration—or the vested interests that prevail over both.