Education Department struck deal with Labor Department to offload career programs

Politico

a day ago

The Education Department struck agreements to send billions of dollars to the Labor Department to administer a suite of education grants and detail several agency employees to the Treasury Department to help manage collections on federal student loans.
Those agency plans, revealed in court documents viewed by POLITICO, are now on hold because of a federal judge's ruling that temporarily blocked the Trump administration's efforts to slash the Education Department's workforce.
But the quiet — and largely unreported — work laid out in the documents shows how the administration is making significant moves to outsource portions of the Education Department's operations to other Cabinet agencies as President Donald Trump tries to shutter the agency.
The department had also been negotiating a memorandum of understanding with the Treasury Department regarding student loan management, agency chief of staff Rachel Oglesby said in a court declaration filed late Tuesday, but paused that work after a court halted the agency's effort to conduct a massive reduction-in-force in March.
The agreement with Treasury was finalized in April, according to documents that identified nine Education Department employees — including a person originally assigned to work as part of billionaire Elon Musk's DOGE effort — who are detailed to the Treasury Department as advisers.
The detailees will 'support Federal Student Aid functions performed in partnership with Treasury,' according to the agreement.
An Education Department spokesperson confirmed the agency signed an agreement with the Labor Department to administer some of the education agency's career, technical and adult education grants.
'The Workforce Development Partnership will allow ED and DOL to better coordinate and deliver on workforce development programs and strengthen federal support for our nation's workforce, a top priority of the Trump Administration,' department spokesperson Madi Biedermann said in a statement on Wednesday.
As part of the agreement with Treasury, workers from the Education Department's collections unit for defaulted loans moved to Treasury's fiscal service bureau to discuss government plans to collect on student debts by intercepting payments such as tax refunds, Biedermann said.
The administration decided to move student loan collections to the Treasury Department after an agreement fell apart with the contractor who handled student loan collections, a former Federal Student Aid official told POLITICO. The Education Department was too understaffed after its sweeping reduction in force to handle collections itself, the person said.
'It was already weak, but then they fired everyone,' said the former official, who was granted anonymity to discuss sensitive agency dynamics. 'So nobody was there to make collections work.'
The Education Department said it paused that work after a federal judge blocked the administration from firing agency workers. The judge in the case ruled that the announced terminations were a thinly veiled effort to functionally dismantle the department without congressional approval.
The Trump administration has appealed that injunction to the Supreme Court. But the pause caused by the court's injunction is 'preventing the Department (and other agencies) from pursuing operational efficiencies and cost-savings,' Oglesby said.
As an example, Oglesby cited an agreement signed May 21 between the Education Department and the Labor Department that would transfer up to nearly $2.7 billion of congressionally appropriated funds out of Education Secretary Linda McMahon's agency to DOL's Employment and Training Administration.
The shift would then put several funding streams under ETA's purview, including formula grants allocated to states through Title I of the Perkins Act and Title II of the Workforce Innovation and Opportunity Act, adult literacy programs and other career and technical education programs currently overseen by the Education Department.
Though DOL would be responsible for overseeing these tasks, the funding would still technically be held by the Education Department under the terms of the agreement, which would then periodically reimburse DOL.
The document says that consolidating the programs under DOL's banner is designed to 'provide a seamless workforce development system' and 'reduce the administrative burden on states' by streamlining reporting requirements.
The agreement was signed by acting ETA administrator Lori Bearden and Nick Moore of the Office of Career, Technical and Adult Education.
A Labor Department spokesperson declined a request for additional details about the arrangement.
'This is one of many existing agreements ED has with other agencies to collaborate on services for the American people,' Biedermann, the education spokesperson, said. 'As acknowledged in the status report, ED has paused implementing this [agreement] while we seek relief from the district judge's preliminary injunction.'
McMahon has said repeatedly that she would not close the agency without congressional approval, however, the Trump administration has taken several steps to slash the agency's operations and workforce. The administration laid off half the staff and then the president announced the department would offload its largest program — the $1.6-trillion student loan portfolio – onto another agency.
Attempts to transfer the massive portfolio have had a turbulent start. It has been a longtime conservative goal to move student loans to Treasury, but the president surprised members of his own party in March when he announced that it would instead go to the Small Business Administration. Education Department officials skeptical of the plan met shortly after the president's announcement to discuss Treasury as an option.
'It was one of the suggestions, as we first started to talk about dismantling the department, [and] what functions would go, perhaps, to which agencies,' McMahon said Tuesday during an event hosted by Bloomberg News. 'But all of that is still part of discussion. It's not an assignment in any way, except that Treasury has taken back over the collection of student loans.'
McMahon has publicly stated that Treasury is a 'natural' place for student loans.
Whether or not the Education Department can move certain programs to other agencies without Congress' say-so is something where the agency has been unclear. At a Cato Institute event in May, McMahon suggested that moving programs to other agencies seemed to be an option.
'As we look to take parts of the Department of Education and flow them into agencies where they might fit, that is the side we can attack right away,' she said. 'Ultimately, this department was set up by statute. Congress will have to vote to close it.'
But the secretary told Sen. Elizabeth Warren (D-Mass.) on Tuesday that the Education Department cannot unilaterally shift its functions to any other agency
'I asked her what authority she would have to transfer any functions of the department somewhere else, for example, to the SBA, and she said 'I can't do that, that is the job of Congress,'' she said.