From the classrooms of inner-city schools to Wall Street, the repercussions of the decision to close the Department of Education will echo for generations. As the calendar flipped over to March 2025, America awoke to a seismic shift in its educational landscape. President Donald Trump’s threat of an executive order to dismantle the Department of Education sent shockwaves through the nation, leaving millions of us grappling with an uncertain future.
While most of us see the impact this will have on our country’s youth, this isn’t just about shuttering an agency; it’s about unraveling the very fabric of American society. As we stand on the precipice of this educational void, one question looms large: Can the world’s superpower maintain its global standing without a federal steward of learning?
The closure of the Department of Education will have repercussions throughout the American economy. It will have immediate and far-reaching consequences for the education sector and related industries. The ripple effects would extend beyond schools, impacting jobs, businesses, and communities across the nation.
Immediate Economic Impact on Education and Education-Adjacent Sectors
The most immediate and visible impact would be widespread job losses in the education sector. According to the National Education Association, federal funding supports approximately 180,000 teaching positions through programs like Title I, which provides resources to schools serving low-income students. Without this funding, school districts would face severe budget shortfalls, leading to layoffs of teachers, support staff, and administrators.
Special education programs funded by the Individuals with Disabilities Education Act (IDEA) would also be at risk, potentially leaving millions of students without adequate support. These job losses would not only harm educators but also have a cascading effect on local economies that rely on schools as major employers.
The educational technology (EdTech) and publishing industries would also feel the bite of federal funding cuts. Companies that provide digital learning tools or traditional textbooks to schools could see a sharp decline in demand as districts lose the financial resources to invest in new materials. EdTech startups that rely on partnerships with federally funded programs may face bankruptcy or need to pivot their business models entirely. This contraction in demand could stifle innovation in an industry that has been a cornerstone of modernizing education and providing access to high-quality educational tools.
In mid-December 2024, Education Week reported federal funding accounts for 8-10% of public school budgets nationwide but is disproportionately critical for districts serving vulnerable populations. Additionally, schools rely heavily on federal grants for technology upgrades, enrichment programs, and infrastructure improvements. Cutting off access to these funds would force schools to scale back or eliminate these initiatives and exacerbate existing educational inequities.
The changes occurring at the national level to the Department of Education affect more than young learners. These changes will reshape higher education’s role as a driver of economic mobility and innovation, as well as disrupt the lives of individual borrowers. Pell Grants, which help low-income students afford college, and federal student loan services would face uncertainty or collapse. The closure of the Department of Education would create immediate uncertainty for the approximately 43 million Americans holding federal student loan debt.
The department currently oversees a $1.7 trillion loan portfolio, managing programs like income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF). If the department is dismantled, these functions would likely be transferred to another agency, such as the Department of Treasury. However, this transition could disrupt loan servicing, delay repayments, and jeopardize forgiveness programs. Borrowers may face confusion about where to access support or apply for relief, and some programs could be scaled back or eliminated entirely.
Without federal oversight, higher education may see a shift toward privatization. For-profit colleges—already criticized for predatory practices—could expand their influence in an unregulated environment, potentially prioritizing profit over educational quality. This shift could exacerbate disparities in college access and outcomes, particularly for students from low-income and minority backgrounds.
Yet, reliance on these questionable institutions will increase because of the loss of access to other sources of education. This shift will lead to fewer students pursuing higher education, reducing the long-term earning potential of millions of Americans. Fewer educated workers stunt the growth of the talent pool inside our borders and stifle innovation.
The Department of Education plays a vital role in funding research through initiatives like the Institute of Education Sciences (IES). The recent cancellation of $900 million in IES contracts foreshadowed the dismantling of federal education infrastructure and its effect on innovation in education. Researchers have already reported losing access to critical data sets and facing delays due to new bureaucratic hurdles.
Researchers are now forced to review data on physical discs instead of secure online platforms, slowing down information gathering to a snail’s pace. This slowdown of research and loss of funding and efficiency will hinder advancements in education policy, learning technologies, and evidence-based practices. Over time, reduced investment in research may weaken the United States’ global competitiveness in education and workforce development.
The closure of the Department of Education would create immediate economic turmoil across multiple sectors. Job losses in education would destabilize local economies, while disruptions in federal funding streams would exacerbate inequities and hinder access to higher education. Meanwhile, industries like EdTech and publishing would face significant challenges as schools prioritize essential services over technological advancements or curriculum updates. These immediate impacts highlight how deeply intertwined education is with the broader American economy.
Beyond the Education Sector
The closure of the Department of Education would have far-reaching consequences beyond the education sector, impacting local economies and communities in various ways. Local business ecosystems around educational institutions would face disruption. Small businesses that rely on student and staff patronage, such as cafes, bookstores, and supply shops, could struggle or close.
In communities like Roxbury, Vermont, where school closures are being considered, residents fear a “slow death” of their community as families consider moving away. The loss of schools as community hubs could lead to decreased foot traffic and economic activity in affected areas, affecting businesses’ bottom lines.
Real estate market shifts near schools would be significant. As schools face potential closures due to funding cuts, property values in affected neighborhoods could decline. In Philadelphia, for example, the closure of 23 schools in 2013 led to community protests and concerns about neighborhood stability. Conversely, areas with well-funded private schools might see increased demand and rising property values, exacerbating socioeconomic divides.
The transportation industry would need to adjust to new realities. With potential school closures and consolidations, bus routes may be eliminated or need to be reconfigured, potentially increasing costs and travel times for students. Complicated or long commutes for young students increase the absence rates in districts where bus transportation is limited. Some districts might explore alternative transportation solutions or partnerships with ride-sharing services to address these challenges. Additionally, morning traffic patterns will be altered as transportation demands shift to families and private transportation solutions.
Healthcare sector implications could be significant, particularly in rural areas where schools often serve as access points for health services. In many communities, public schools are often the first line of contact for healthcare, with many offering dentist check-ups, hearing screening, physicals, administration of medications during the school day, and providing much needed health education to students and families.
The loss of school-based health programs could increase pressure on local healthcare providers and potentially lead to poorer health outcomes, especially for low-income families. Additionally, the potential loss of special education services provided through schools could create new challenges for families of children with disabilities.
Why Should Business Professionals Care About Changes Happening in Education at the Federal Level?
Federal education policy is often perceived as a concern limited to students, families, and educators. However, its ripple effects extend far beyond the classroom, influencing the economy, workforce readiness, and even the operational strategies of businesses. For business professionals, understanding and engaging with changes in federal education policy is not just a matter of corporate social responsibility but a strategic imperative.
Workforce development and talent pipelines are the most tangible outcomes of a robust education system. Federal education policies directly impact the quality and preparedness of the future workforce. For example, industries reliant on STEM graduates may struggle to find qualified candidates if access to higher education becomes more limited. Companies like Microsoft and Google, and yes– even Tesla– have already invested heavily in educational initiatives to ensure a steady pipeline of skilled workers, recognizing that federal disengagement could leave gaps they must fill.
The Department of Education plays a critical role in distributing grants that enable groundbreaking research and development. For instance, pharmaceutical companies often collaborate with university researchers whose work is funded by federal grants. If this funding stream dries up or becomes inconsistent due to these policy changes, it could slow progress in critical industries like biotech and renewable energy.
Economic stability is also an outcome of access to education. Education is a cornerstone of economic mobility, and federal policies play a significant role in leveling the playing field for disadvantaged groups. When access to education diminishes, income inequality widens, reducing overall consumer spending power. Businesses in retail, real estate, and financial services could feel the pinch as fewer individuals achieve the earning potential associated with higher education degrees.
Educational institutions act as economic anchors and shape the culture of communities. Local businesses—cafes, bookstores, housing providers—depend on students and staff for revenue. Changes in federal funding can lead to school closures or reduced enrollment, disrupting these ecosystems. For example, small businesses near colleges may see significant declines in foot traffic if fewer students can afford tuition due to cuts in federal aid programs.
Education is a Shared Responsibility
The intersection of federal education policy and business operations underscores the interconnectedness of society’s systems. Business professionals have much at stake when it comes to changes in federal education policy—not only as employers but also as stakeholders in economic stability and innovation. Engaging proactively with these shifts is not just about safeguarding profits; it’s about ensuring a sustainable future where businesses thrive alongside an educated workforce.
