The Future of Federal Oversight in Higher Education: Potential Impact of the Proposed “Returning Education to Our States Act”

The landscape of federal involvement in higher education may be on the cusp of a radical transformation. A recently introduced Senate bill, titled the Returning Education to Our States Act Senate Bill 1402, proposes a sweeping dismantling of the U.S. Department of Education. If enacted, this legislation would fundamentally alter the distribution of federal responsibilities for higher education, with implications reaching every corner of college and university administration—from financial aid and civil rights compliance to long-term fiscal planning and institutional accountability.

This article provides Chief Finance Officers (CFOs) and other higher education C-suite leaders with a breakdown of the bill’s provisions and the potential impacts on their institutions.

Abolishment of the U.S. Department of Education

At the heart of the bill is a bold proposition: the termination of the U.S. Department of Education within one year of the act’s passage. The department’s centralized oversight of federal education programs and regulations would be dissolved. In its place, responsibilities would be redistributed among other federal departments, and block grants would be sent to states for local administration of higher education funds.

Implications for institutions:

• Uncertainty in the near term around regulatory continuity, oversight, and funding mechanisms.
• Increased variability across states in policies governing higher education.
• Potential challenges in navigating multiple federal agencies for education-related compliance.
• Unknown impact to enrollment resulting from confusion and difficulties accessing  federal financial aid during the transition period.

Transfer of Title IV Responsibilities to the U.S. Department to the Treasury

Key federal student aid programs under Title IV of the Higher Education Act of 1965, including Pell Grants, federal loans, and work-study, would be administered by the U.S. Department of the Treasury (Treasury). The Health Education Assistance Loan (HEAL) Program would also shift to Treasury oversight.

Implications for institutions:

• New administrative protocols and reporting systems may emerge under the Treasury’s control.
• The Treasury’s lack of education-specific expertise could complicate program management or responsiveness to sector needs.
• Institutions should prepare for a learning curve as the Treasury establishes new implementation procedures for aid disbursement, eligibility, and compliance.

Block Grants for Postsecondary Education

The bill introduces a Postsecondary Education State Block Grant Program, funded and administered by the Treasury. States would receive funding based on student enrollment figures. To access these funds, states must:

• Submit student data to the federal government.
• Conduct annual independent audits on fund use.

Implications for institutions:

• States would gain greater discretion over the distribution and use of federal postsecondary funds.
• Institutions could face differing funding criteria, reporting expectations, and oversight processes depending on their state.
• State-level decisions may amplify disparities between regions and types of institutions (e.g., public vs. private, urban vs. rural, research vs. teaching).
• Timing of funding could be impacted as States may struggle to assume responsibilities.

Civil Rights Enforcement Shift to U.S. Department of Justice

The Office for Civil Rights (OCR), a critical component of the U.S. Department of Education,  would cede its responsibilities to the Civil Rights Division of the U.S. Department of Justice (DOJ).

Implications for institutions:

• Possible shift in enforcement priorities and methodologies for Title IX, American Disabilities Act, and other federal civil rights statutes.
• DOJ’s broader legal focus may reduce the specialized attention previously provided by OCR to education-related equity and access.
• Institutions may need to revise internal civil rights compliance frameworks to align with DOJ’s enforcement protocols.

Redistribution of Other Programs

Additional responsibilities would be transferred:

• Vocational education programs may be absorbed by the U.S. Department of Labor.
• Special education functions could shift to the U.S. Department of Health and Human Services.
• Other discretionary programs (e.g., teacher preparation, research support) may be discontinued or repurposed under new agency guidelines.

Implications for institutions:

• Loss or disruption of targeted federal grants and technical assistance programs.
• Greater pressure to align programmatic offerings with state and local priorities.
• Need for closer coordination with a wider array of federal agencies.

Transition Planning and Institutional Readiness

The bill calls for a presidential reorganization plan, requiring formal consultation with Congress and a coordinated handover of staff, records, and responsibilities across multiple agencies.

Implications for institutions:

• Disruption in service delivery, application processing, and regulatory interpretation during the transition period.
• Higher education finance and compliance teams should take action and begin scenario planning now including
  • Tracking legislative progress and analyze timelines.
  • Establishing state-level advocacy strategies to influence future block grant criteria.
  • Investing in systems capable of multi-agency compliance and reporting.
  • Preparing to address questions from applicants, students, and parents.

Author’s Note:

This article reflects the bill as introduced and does not account for potential amendments or political obstacles. Institutions should consult their government relations advisors and policy counsel, for institution-specific implications. For more detailed information on the proposed provisions and full legislative text, see the Returning Education to Our States Act (S.1402, 119th Congress, 2025).