The federal government just withheld almost $7 billion in school grants. What can your school do?
On July 1, the Trump administration withheld roughly $7 billion in FY 2025 federal education funding from schools. In a statement, the Department of Education announced that this action has been taken pending a review.
This grant withholding will directly affect students, teachers and the ability of educational institutions to carry out their mission. Given that schools rely heavily on the annual July 1 funding disbursement to fund operations for the coming year, administrators are now scrambling to find a way forward.
There is no magic solution here. But let’s explore the situation further and review actions you can take to position your school to better manage today’s challenging political and financial climate.
What does the Trump administration’s educational grant withholding mean for students and schools?
Federal law requires that grant funding be released to schools on July 1 annually. But this year, it didn’t happen.
Per a Department of Education message to state education officials, affected grant programs include those authorized under Title I-C, Title II-A, Title III-A, Title IV-A and Title IV-B.
As a result, school administrators are now staring at massive budget shortfalls. Leaders who included grant funds when budgeting for the 2025-2026 school year — which is likely almost all of them — are now confronting the heavy question of not whether to make cuts, but where.
Funds have also been withheld from organizations that provide summer programming and community wraparound care and will likewise impact private schools that accept federal funding.
However, not all districts will be equally affected here. Schools serving populations with higher levels of poverty get more grant money than those that operate in wealthier areas, so it is those students who will bear the brunt of cuts.
As those same students will likely soon also be feeling the effects of major reductions in funding for SNAP and Medicaid, school leaders should face this moment like the crisis that it is.
Additional specific areas that will be heavily affected include:
- Anything related to diversity or DEI.
- School renovation or construction projects that include solar or wind energy elements. While not directly related to the July 1 withholding, this may be a significant additional financial challenge, as clean energy tax credits have been phased out by the One Big Beautiful Bill Act budget law that President Trump signed on July 4.
What can your school do to keep serving your students despite funding cuts?
The funding landscape has likely just changed for the foreseeable future. Lawsuits may eventually free up some amount of grant money, but you shouldn’t count on a resolution anytime soon.
However, you are not without options here. Your school does have a path forward. Let’s take a look at some of what can be done.
1. Reduce expenses
Let’s start with the obvious but painful. If your school is now facing a major budget crunch, you will almost certainly have to make cuts in your planned spending.
The key here is to prioritize. Focus on your core mission of serving your students. What parts of your budget are essential to that mission, and which are more ancillary?
Areas to first consider for cuts may include things like facilities costs via closing certain buildings or consolidation.
2. Clarify your strategic vision
Part of making spending cuts less damaging is to get really clear on where you want your school to go. Most schools do have a strategic plan, but it’s often something you update once in a while and then set aside until it’s time for the next refresher.
But since your budgeting will need to be more careful and intentional than ever, having a clear vision can really help. Take the time to build an agile strategic plan that really fits your institution, including your anticipated needs and any contingencies you may wish to prepare for ahead of time.
Focus on your main goals. How can you still address them despite changing financial circumstances? This ties into prioritizing which activities and services support your core mission.
Ideally, you should make your strategic plan a living document that your team actively refers to and updates as you go along.
3. Focus on communication
Communication is essential to navigating any change. That goes doubly so when the change has such a major impact on people’s lives and livelihoods.
You need to maintain excellent, open communication with your teachers and administrators. But there are others you should also consider here.
Take parents and other caregivers. Fairly or not, many schools lost the trust of their communities during COVID-19. Here, though, active communication with caregivers can not only help them understand what’s happening and why your school has to make changes but also begin to rebuild trust and strengthen your ties to the broader community.
Likewise, you have an opportunity to create deeper relationships with your school board. Elected officials can benefit from learning more about how your specific school’s budgeting actually works.
By keeping them informed, you can help them better understand the realities facing schools in their district as well as lay the foundation for more effective collaboration moving forward.
4. Diversify your funding
This is not a quick fix. But as you update your strategic plan and look for ways to move forward, ask how you can diversify your funding.
Options here to consider:
- Apply for foundation grant money.
- Private schools should reassess tuition.
- Public schools that offer vocational or job training classes may seek out private funding from businesses that benefit from a trained workforce.
- Sell or lease unused property or facilities.
- Explore additional public-private partnerships with local businesses and community service providers.
5. Learn from others
Thankfully, you don’t have to figure any of this out on your own. Collaboration can be a huge asset for you here.
Talk with peers at other schools or in other districts. Ask each other: “What are you doing about the budget shortfall?” Share knowledge, ideas and promising practices with each other.
And consider asking for help from an advisory firm that specializes in working with PK-12 educational institutions. The more you can learn from others, the better you’ll be able to navigate what your school is facing.
6. Share costs with other districts
As you talk with leaders at other schools or districts, explore ways in which your institutions could collaborate to share costs. Are there areas of overlap where you could save money by working together or forming an official consortium?
On the district level, busing is one area to investigate. Consider the financial benefits of cooperating on busing rather than operating independent systems.
7. Build your rainy-day fund
This is not easy to do in the middle of a shortfall. But making the effort to build your rainy-day fund is important because the July 1 cuts may not be the last.
Put aside what you can. By doing so now, you’ll slowly begin giving your school additional financial resilience.
How Wipfli can help
Wipfli advises school leaders on how to thrive in the face of challenges. Ask our team for help navigating budget shortfalls, understanding the new policy environment and managing change. Learn more here. And access our policy changes resource hub here.
