Five EdTech questions for the new administration

Education has rarely featured as prominently in a presidential election as it did in 2024. The president-elect has vowed to shutter the federal Education Department, shunting its legislated administrative duties to other departments and striking a blow against perceived Washington bloat. And while this has long been a standard Republican platform plank, it feels like this time, they really mean it.

The split in the electorate between those with a college degree and those without is as stark as ever, and universities themselves have become a nexus in the culture war. The interpretation and administration of Title IX is a focal point for larger cultural fights over gender identity and what some view as toxic masculinity. The effort to absolve college grads of their student loan obligations has also become a wedge issue. And, of course, college campuses have been at the center of often strident displays of hostility toward U.S. policy in the Middle East. Meanwhile, the antipathy toward elite universities on the Right has become so prominent that many institutions fear that punitive changes to grant funding formulas and a loss of tax-exempt status for college endowments could be on the table in 2025.

But while those more dramatic battles capture most of the headlines, several lesser issues are far more consequential for edtech and other education businesses selling various solutions and services to schools and students. Below are five areas of specific focus and some discussion of potential changes.

Title I Trepidation
While the federal budget makes up less than 10% of overall public K-12 spending, the areas it funds, most notably the $16.5 billion spent annually through Title I for low-income students, are highly consequential for hundreds of companies, large and small, selling products and services to K-12 schools. The level of spending and which districts receive funds cannot be easily altered with executive action, as Congress directs the dissemination of funds through statutory formulas. However, the federal Education Department writes the guidelines determining how the dollars may be spent.

There is some concern that a new administration intent on stamping out social indoctrination in schools could impose new restrictions, for example, excluding programs aimed at behavioral versus academic instruction. This so-called Social and Emotional Learning (SEL) content, intended to help students learn how to regulate their behavior, has become very popular over the past 10 years. Yet critics regard these programs as outside the school’s purview and too focused on teaching values that may not conform to parents’ wishes. The uncertainty has caused some investors to pause investments in businesses dependent on Title I dollars while the new administration’s intent in this area becomes clearer. The good news for these companies (and bad news for SEL and other skeptics, perhaps) is that money is ultimately fungible, and schools have long been adept at swapping state and federal dollars to fund the programs they want. In other words, if the dollars are still there and the demand still exists, schools will figure it out.

Short-term Pell
The Bipartisan Workforce Pell Act, which would allow Pell Grants to be used for workforce training programs as short as eight weeks (the current limit is 15,) has been making its way through Congress over the objections of progressive critics who fear it will be abused by ineffective offerings from the private sector. This is despite a requirement in the proposed law that proven strong employment outcomes be a prerequisite for participation. Programs would have to demonstrate a minimum 70% completion rate and a 70% job placement rate to qualify. In addition, the median participating student’s earnings must exceed $22,590 (plus the tuition price) one year after completion.

A unified Republican Congress would likely push the bill over the finish line or even allow the language to become more expansive in embracing programs outside the traditional college sector. While not every private business wants to subject itself to the regulatory scrutiny that comes from accepting Federal dollars, the passage of this law is likely to fuel growth in a range of private-sector training models. While passage of the law is up to Congress, it is notable that Linda McMahon, the nominee for Secretary of Education, penned an op-ed in September praising the bill. Full support of the Education Department (or whichever still-existing agency might be tasked with oversight in the future) will be critical to making the new law successful.

Gainful Employment
Over the past 15 years, for-profit colleges have become a partisan political football. Right-leaning policymakers have admired the schools’ tendency to innovate and their pragmatic market orientation. On the other hand, left-leaning policymakers mistrust their motives and practices and worry that investor and student interests are at odds. The Higher Education Act allows these institutions to participate in the Federal Financial Aid program but places additional oversight and restrictions on participation not faced by traditional not-for-profit schools. One of these restrictions insists that for-profit programs of study must lead to “gainful employment.” What this means and how it is measured has been left to the discretion of the Secretary of Education.

The Obama Administration introduced an elaborate rule to measure whether for-profit school programs lead to gainful employment. The Trump administration subsequently rescinded the rule, and the Biden administration reintroduced it in an even more Draconian form. In its current incarnation, the Biden rule insists on a maximum student loan debt-to-income ratio and that any program graduate earns more than a median high school graduate in whichever state it operates.

The current version of the rule is being challenged in court, and in the wake of the Supreme Court’s Loper Bright decision limiting the latitude offered to the executive branch in interpreting statutory language and intent, it has a fair chance of being overturned. On the other hand, an incoming Trump administration could inform the court of an intention to re-regulate, in which case the court could pause the case while the so-called GE Rule is, once again, rescinded through a formal rulemaking process, only to be perhaps re-introduced by a future Democratic administration.

The incoming administration, therefore, faces a risky but consequential decision. It could allow the suit to move forward, and if the court overturns the rule based on overreach, it will have case law that would put the matter to rest until Congress made its wishes clearer through new legislation. On the other hand, if the court upholds the rule, it could make rescinding it through a new rulemaking process difficult on the same basis. Ironically, the Loper Bright precedent would likely favor leaving a settled interpretation alone in that circumstance. Whether and how this GE rule question is settled will have existential consequences for dozens, if not hundreds, of proprietary vocational schools.

90/10 Guidance
Another rule specific to for-profit colleges is that these institutions must derive at least 10% of their revenue from non-federal sources. Congress explicitly tightened this requirement in 2021 by folding GI Bill and military assistance benefits into the equation. This rule can be challenging for tuition-dependent schools, particularly those offering shorter, less expensive vocational programs at tuition rates below most student aid benefits. These entry-level skill programs, often in healthcare trades, tend to appeal to less economically advantaged students who entirely use their loan and grant benefits. The rule can also be challenging to schools that, because of their location or instructional focus, disproportionately appeal to veterans who can combine GI Bill benefits with other federal student aid.

One avenue available to schools in this predicament is to offer versions of their training to corporations looking to bolster the skills of their employees or non-credit classes to individuals on a cash-pay basis. This cash-pay business in academically aligned areas can be counted in the 10% portion of a school’s total revenue as measured for compliance with the law.

However, in another demonstration of the progressive antipathy toward these types of schools, the Biden administration included a provision disallowing any amount of online instruction in these areas. So, face-to-face non-credit training can be counted, but online non-credit instruction cannot. The trouble is that face-to-face training instruction in 2024 is nearly obsolete. Today, most students and corporations want at least some of the material delivered electronically. A more sympathetic Trump administration is expected to reverse at least this provision, which seems designed only to frustrate compliance and discourage these schools’ ability to grow enrollment.

Bundled services
Continuing the theme of progressive antipathy toward private sector involvement in education, the Biden administration introduced the specter of new rulemaking among companies providing services to colleges and universities of all kinds. This new regulatory initiative was intended to curb a growing practice whereby some service companies share tuition revenue with schools in exchange for providing a bundle of services, including, in many cases, enrollment marketing. A provision in the Higher Education Act prohibits all schools from paying any incentive for enrollment. These so-called bundled services companies were excused from this provision through a letter from Obama’s education secretary. However, this safe harbor assurance does not even have the force of a formal rule, and many critics view the practice as problematic.

In its initial effort to wrap its arms around this practice, the Biden Education Department signaled that it would seek to impose regulation across a wide swath of service companies. This led to an uproar in multiple areas of higher education, including large publishers and a range of software providers, not to mention schools themselves, and the administration paused its efforts. However, before the election, it indicated that it would take up this rulemaking again, presumably in a new Biden term. Since the election, rumors have circulated that the Biden administration might revoke or rewrite this guidance letter. Chairman of the House Committee on Education and the Workforce Virginia Foxx wrote a letter to the outgoing Secretary of Education warning him specifically against taking this step.

Hundreds of millions of dollars are at stake in this question, involving private companies and some of the country’s most elite colleges and universities. If the outgoing administration decides to tip the apple cart on its way out the door, this relatively obscure matter could become one of the new education secretary’s most urgent priorities on Day One of a new administration.