Recent developments in Washington regarding budget reconciliation indicate potential significant impacts on education programs, particularly in higher education.
But, what is budget reconciliation anyway? I explained it in a 2021 primer on Forbes.com, noting that it “is essentially ‘reconciling’ the federal budget.”
“The process was created by the Congressional Budget Act of 1974 and allows Congress to consider — rather expeditiously — tax legislation, spending legislation and debt resolution legislation. There have been over twenty budget reconciliations enacted since 1980,” the Forbes.com post added.
When Congress decides to use reconciliation legislation to address spending, it can only be used to address mandatory spending. Mandatory spending is also known as ‘entitlement’ spending, or funds used for programs that are required—or authorized—by law. In education, the better-known examples of entitlement programs include child nutrition and student loans. Across the federal government, the best known entitlement programs are Medicare, Medicaid, and Social Security.
The other part of the federal budget consists of “discretionary” spending, which Congress controls through the annual appropriations process. Reconciliation is not used to address discretionary spending.
There has been a lot of confusion and misinformation about the federal programs within the jurisdiction of education and workforce that could be impacted by budget reconciliation. In fact, there are just a few federal programs—albeit with significant reach and impact—that could even be subject to budget reconciliation “instructions,” or the guidelines given to committee leaders to increase or decrease mandatory spending over a period of time.
In the last month, the U.S.House of Representatives Budget Committee adopted a resolution initiating the reconciliation process and directing the House Committee on Education and the Workforce to identify $330 billion in spending cuts over the next 10 years. This directive aligns with broader goals to reduce federal spending by $2 trillion while implementing $4.5 trillion in tax cuts. While the Senate has yet to take action, budget reconciliation instructions are forthcoming and their impacts will be felt by the American people.
But, what do these numbers mean in a broader context of the actual cost of the programs under the jurisdiction of the education committees?
House Committee On Education And The Workforce
The House Committee on Education and the Workforce oversees several major mandatory spending programs:
Student Loan Programs
The Federal Direct Student Loan Program represents approximately $90-100 billion in annual mandatory spending. This figure reflects new loan originations, though the net cost to taxpayers varies significantly based on repayment rates and interest.
Child Nutrition Programs
The National School Lunch Program and School Breakfast Program together account for roughly $30 billion annually in mandatory spending. These entitlement programs adjust automatically based on participation rates and food inflation indices, serving over 30 million children daily.
Pension Benefit Guaranty Corporation
While technically off-budget, the PBGC manages approximately $110 billion in assets against $164 billion in liabilities. Its multiemployer program faces an estimated $38 billion deficit, while the single-employer program has improved to a surplus position of approximately $15 billion.
Certain Workforce Training Components
Mandatory spending elements tied to unemployment insurance include roughly $3.5 billion annually for extended benefits and training allowances, though this fluctuates significantly during economic downturns.
Senate Health Education Labor And Pensions Committee
The Senate HELP Committee shares jurisdiction over education and workforce programs, as noted under the House Committee on Education and the Workforce, but also oversees significant health-related mandatory spending including Medicare Parts B and D, the Child Care and Development Fund, the Maternal and Child Health Block Grant, and programs under the Public Health Service Act.
Both committees with jurisdiction over mandatory-program education spending face similar challenges as they consider cost-savings measures including demographic pressures, economic sensitivity, long-term financial sustainability and political complexity.
Political Challenges
The budget reconciliation proposal could lead to increased financial pressures for student loan borrowers, but may also provide longer term relief for taxpayers and parents.
“Budget reconciliation is the right process to address student loan repayment and forgiveness because it allows Congress to enact targeted, fiscally responsible reforms that ensure fairness for both borrowers and taxpayers,” says Steven Taylor, policy director and senior fellow for economic mobility at Stand Together Trust. “Reconciliation provides a path to streamline repayment policies, curb the rising cost of forgiveness programs, and ensure that higher education financing is sustainable—without adding to the national debt. Instead of sweeping, costly loan cancellations, Congress should use this opportunity to create a balanced solution that promotes accountability and long-term affordability.”
Many policy and political insiders believe Republican policymakers will propose to end former President Joe Biden’s Saving on a Valuable Education program, which was implemented through executive action, and thus limiting borrowers to just two repayment choices. The SAVE program is an income-driven repayment program that was introduced to make federal student loan payments more manageable for borrowers; however, the SAVE program is currently being challenged in the courts and the future of the program remains uncertain. By eliminating the SAVE plan, Congressional Budget Office estimates indicate savings of approximately $230 billion over the next decade.
“President Biden created the SAVE program as a last-ditch effort to cancel student debt after the courts blocked his more explicit efforts,” says Dr. Beth Akers, Senior Fellow with the American Enterprise Institute. “By ending the SAVE program, Congressional Republicans will save taxpayers from paying for billions in subsidies that were often going to well-off borrowers and also fixing the perversion of incentives created by the program that would have put tremendous inflationary pressure on higher education.”
Insiders also speculate Public Service Loan Forgiveness eligibility could be restricted, and there could be caps on Pell grant awards or overall Pell Grant spending. While these reforms could generate some savings toward the overall federal savings objectives, they are less politically palatable, given Pell grants and PSLF provide financial assistance to some of the lowest-income students and earners.
“Public Service Loan Forgiveness and Pell Grants are essential programs with bipartisan support that create real opportunities for Americans to pursue higher education and public service careers,” says Julie Peller, CEO of Peller Strategies and former Deputy Staff Director to the House Committee on Education and Workforce. “These programs aren’t just budget items—they’re investments that work. Any budget savings directly reduces benefits for students and public servants. Even in budget reconciliation, we must minimize harm to low-income students and public servants. I hope Congress will preserve programs that have helped build our workforce and strengthened communities nationwide.”
Some insiders believe there could be significant reductions or full elimination of parent and graduate PLUS loans. Critics of the proposal argue that removing these loan options could disproportionately affect low-income families and students attending Historically Black Colleges and Universities and other Minority-Serving Institutions. However, supporters of the proposal argue that PLUS loans contribute to tuition inflation by allowing colleges and universities to raise costs without concern for affordability, given these loans have no borrowing limits (other than cost of attendance).
“The federal PLUS loan program, while designed with good intentions, has become a case study in unintended consequences,” says Chris Keaveney, co-founder and CEO of Mertizie and former credit officer of SoFi and Chase Education Finance. “By offering virtually unlimited borrowing with minimal underwriting, it has enabled tuition inflation, saddled families with unsustainable debt, and disproportionately harmed the most vulnerable borrowers. True educational opportunity requires not just access to loans, but a system that doesn’t trap families in financial quicksand for generations. Budget reconciliation offers us a rare chance to reform or replace this well-intentioned but deeply flawed program with solutions that actually deliver on the promise of affordable higher education.”
Data show parents, particularly those near retirement age, take on excessive debt to fund their children’s education, leading to financial insecurity later in life. And, graduate students across disciplines borrow upwards of six figures and struggle to repay their loan balance for decades.
“Changes to our federal higher education policies must go beyond piecemeal budgetary considerations in order to truly address the structural barriers that impede student success,” says Dr. Yolanda Watson Spiva, president of Complete College America. “It is time for a comprehensive reauthorization of the Higher Education Act that prioritizes student outcomes, simplifies pathways to completion, strengthens institutional accountability measures, and modernizes support systems to meet the needs of today’s diverse student population.”
The Path Forward: Education’s Critical Role In Budget Reconciliation
While defense spending and entitlement programs such as Social Security often dominate budget headlines, education and workforce mandatory programs represent nearly a trillion dollars in annual federal commitments with profound economic and social implications. These programs constitute essential investments in human capital that touch millions of American households directly.
Unlike discretionary appropriations that Congress revisits annually, these mandatory programs operate according to established formulas and eligibility criteria—effectively functioning outside the regular budget process unless specifically targeted for reform. This automatic nature creates both fiscal stability and budgetary challenges.
As policymakers navigate budget reconciliation processes, they confront difficult trade-offs between fiscal responsibility and maintaining crucial support systems for education, workforce development, and economic mobility. Technical adjustments to formulas, eligibility requirements, and program structures may appear as abstract budgetary exercises, but their consequences materialize in classrooms, workplaces and household finances, nationwide.
Federal education policymakers find themselves at a critical intersection of budget policy and human investment. Their oversight of these substantial mandatory programs ensures they will remain significant players in reconciliation negotiations for years to come—balancing fiscal constraints against the nation’s commitment to educational opportunity and workforce development.