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Mass Layoffs at The U.S. Department of Education by 50%

Elite Personal Finance

Last Update: March 20, 2025 • Financial News •

Layoffs at the US Department of Education are underway, which will affect nearly 50% of our workers.

According to the US Department of Education website, impacted staff will be placed on administrative leave starting March 21st while continuing to deliver on our statutory programs, including but not limited to Pell Grants, formula funding, and student loans.

“Today’s reduction in force reflects the Department of Education’s commitment to efficiency, accountability, and ensuring that resources are directed where they matter most: to students, parents, and teachers,” said Linda McMahon, Secretary of Education. “I appreciate the work of the dedicated public servants and their contributions to the Department. This is a significant step toward restoring the greatness of the United States education system.”

The layoffs have drawn considerable criticism from both sides of the aisle. For example, California Attorney General Rob Bonta, along with 20 participating Democrats, sued the Trump administration, calling the recent layoffs illegal per the Constitution. They argue that they will be especially harmful to low-income and special education students, affecting future loan and grant awards provisions.

Even major rating agencies like Moody’s have stepped in, cutting the outlook for the US from stable to negative, citing recent federal policy changes that “create a more difficult operating environment for colleges and universities.” One key concern amongst credit agencies is the recent cancellation of $400 million in federal grants to Columbia University, an Ivy League school in the state of New York, due to ongoing antisemitism towards Jewish students by protesters.

Other research schools also stand to be impacted.

“Top-rated institutions with strong demand and significant financial resources are better equipped to handle these challenges than those with weaker brands and more limited financial resources,” said Moody’s analysts.

The National Center for Education Statistics, the US Department of Education statistics unit responsible for analyzing education data, just release over 100 Institute of Education Sciences employees who sold jobs to collect and report on data to release graduation rates and thousands of other statistical data points to improve education and teacher development and address the needs of underserved students.

“Despite spending hundreds of millions in taxpayer funds annually,” saidUS Department of Education’s Deputy Assistant Secretary for Communications, Madi Biedermann, “IES has failed to effectively fulfill its mandate to identify best practices and new approaches that improve educational outcomes and close achievement gaps for students.”

What Happens To Student Loan Debt and Income-Driven Repayment Plans?

American students have fallen into a state of despair over the future of the Department of Education and what it does to their student loans. As of March 12th, hundreds of users reported that studentaid.gov, one of the government’s official federal websites for student loans, was not operating due to technical issues, affecting their ability to apply for the FAFSA program.

Another area under heavy contention is Income-Driven Repayment Plans (IDR Plans), which are federal student loan repayment plans that regulate monthly borrower payments based on income and family unit size with the goal of making payback more affordable. To do so, monthly payments are capped at a percentage of discretionary income up to a set limit and for a set number of years, ranging anywhere from 20 to 25 years, depending on the program.

Of these, there are four different types of income-driven repayment plans, which include the SAVE Plan (Saving on a Valuable Education Plan), Income-Based Repayment (IBR) Plan, Income-Contingent Repayment (ICR) Plan, and Pay As You Earn (PAYE) Plans.

Deferred Resignation and Voluntary Separation Incentive Payment Programs are different places.

Before Trump was elected president, the US Department of Education had a little over 4,000 workers. Now, it would have a little over 2,100 workers, with 259 employees accepting the Deferred Resignation program and 313 employees accepting a Voluntary Separation Incentive Payment.

Here’s the original email from the US Office of Personnel Management to employees regarding deferred resignations to federal employees, which called for a return to office, a change in performance culture, a more streamlined workforce, and enhanced conduct.

In turn, the Voluntary Separation Incentive Payment is a one-time Office of Personnel Management (OPM) offer to employees of payments of up to $25,000 in exchange for resigning from their jobs or opting for early retirement, which is a lot cheaper than paying someone where severance packages are potentially more significant.

The extensive criteria for employees to meet under the program include serving an appointment without a time limit and being currently employed by the federal government’s executive branch for at least three years, along with geographic considerations. There are also provisions if an employee receiving a VSIP returns to a government job within five years. Certain concessions are also made towards a repayment requirement.

In short, cuts to the Department of Education have clouded many things, including job prospects for existing employees, the future of student loan debt, and how reducing the workforce can keep the institution functioning at a high level.

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