Observers are watching how the Trump administration will reform – or dissolve — the U.S. Department of Education. As with many other changes in Washington, the opposing sides are revving their engines. Significant financial questions face us in this initiative, which makes this a good topic for us to tackle.

The Department of Education writes and oversees a wide variety of educational policies. These include qualifications for federal financial aid, protection of access for minorities and the treatment of women in higher education.

If the Department is totally abolished and if its functions go back to the states, the country would find a variety of policies from state to state. Some states would be much closer to the policy preferences of teachers’ unions. School choice would win out in some locations and fail elsewhere.

Critics of the likely changes find comfort in the idea that federal oversight provides consistency across the 50 states. However, everything does not play out this way in other controversial matters.

There are currently 27 open-shop states and 23 closed-shop states, making a national mixture of union-related policies. The drift has been toward open-shop. This kind of pattern could overlap with changes to the disappearing DOE.

As investors know, Ford, General Motors, Mercedes Benz, Volkswagen, Honda and other major auto makers have been looking toward states with open-shop laws for building new plants. Mississippi, Tennessee, Kentucky, Alabama and Louisiana have benefitted significantly.

The country has a huge number of higher education institutions, but new colleges might be more likely to open in states that limit the authority of unions.

School choice

A shift to policies determined by the states would also bring a big change in school choice. Northeast and Upper Midwest manufacturing- and union-oriented states would be likely to limit school choice. Others would lean toward greater school choice, which would open the door to more charter and private schools at the grammar and high school levels.

Financial oversight

In addition to a long list of policies overseen by the DOE, its role in overseeing Title IV financial aid is massive. For 2024, the total amount of federal Title IV financial aid is estimated at $126 billion. About $38 billion was given out in Pell Grants, which do not have to be repaid. A total of $86 billion was distributed in student loans, which carry modest interest rates. 

For many, this is the primary role of the DOE. Numerous families and students depend on this system to provide a make-or-break factor in whether to attend college. This will not go back to the states. The function would likely shift to the U.S.. Department of the Treasury or another federal agency.

Policy changes

Much of the public discussion concerns protecting civil rights and funding for minorities and students with disabilities or who are from low-income families. These programs will not disappear.

There may be some interesting differences state-by-state in how policies would look at admissions standards, for example, considering the candidate’s racial identification. Also, Title IX, which regulates how female students are treated, might find divergent policies when crossing state borders.

Rules and regulations related to college sports management might also differ from state to state. Recruiting and managing student athletes might provide sharp distinctions. Some states might even allow student athletes to be paid openly in addition to being on scholarships. This would open the door to students who are  “professional” athletes. Softer state regulation might blur the lines between amateur and professional.

States making educational policy might also change the role of state universities and community colleges, which have become a feeder system for four-year colleges. State and local taxes pour into these  institutions along with Title IV financial aid.

State control of the entire public university education structure inside their boundaries in the new era might adjust policies on admitting two-year college students into four-year programs. Big states with massive public universities might ease entry requirements as the public institutions expand.

For example, ability-to-benefit students, those who did not graduate from high school or earn a general equivalency diploma, might find an easier route to college entrance and to receiving financial aid. ATB students were cut off from Title IV aid in 2012. Community colleges would relish an opportunity to open their doors to this segment of students.

Shrinking federal education funding

This is a separate matter from dissolving the Department of Education. But, if the government shrinks Title IV and other funding, there would be a shakeup in higher education.

For decades, the top academic institutions have thrived. Many have large endowments and their current students receive federal assistance. Schools with less stellar reputations – the ones without Nobel Prize winners on the faculty and that use open admissions – have actually done very well thanks in large measure to the massive flow of federal aid.

Colleges in the middle have suffered. They lack the swagger of the top schools and are much more expensive than community colleges. If Title IV shrinks, they might get a booster shot because they will appear less expensive than the top schools and closer in cost to those featuring open admissions.

This is, however, all speculation. The Trump administration might decide to leave everything pretty much as is and simply shift responsibilities to other federal agencies.

More from Michael McTague: Weight-loss drugs top target of Medicare price negotiations