Federal Programs
Weekly Brief
Curated intelligence for district federal program leads
Provided by EnchantED LLC
OMB Is Withholding Over $2 Billion in Congressionally Approved Education Grants — Impoundment Concerns Mount
As of May 5, the White House Office of Management and Budget has unlocked little or no FY2026 funding for nearly 35 of the Education Department’s competitive grant programs, despite Congress approving those funds in February. Education Week’s analysis of OMB apportionment documents found that all 35 affected programs share a common thread: the Trump administration has proposed eliminating them in back-to-back budget proposals, and Congress has rejected those eliminations both years. For 13 of the 35 programs, OMB has released only token amounts — including $200,000 of a $23 million appropriation for American History and Civics. Nearly $1.4 billion in FY2026 funds will expire and return to Treasury by September 30 if not released.
This pattern constitutes impoundment — the illegal withholding of congressionally appropriated funds without the rescission process required by the Impoundment Control Act of 1974. Districts holding competitive grants in affected programs (including comprehensive centers, American History and Civics, and others the administration has targeted) should confirm drawdown status with their program officers. Legal challenges are expected. Indiana districts operating under FY2026 competitive awards should document all expenditures carefully and maintain contact with their IDOE program liaisons for any state-level communication from ED.
ED Finalizes Student Loan Rule That Could Shrink Indiana’s Teacher and School Leader Pipeline
The U.S. Department of Education has released its final rule implementing the higher education provisions of the One Big Beautiful Bill Act (OBBBA), establishing new aggregate lifetime federal loan limits for graduate students. Students in most graduate and doctoral programs — including education, social work, occupational therapy, and nursing — are now capped at $20,500 per year and $100,000 lifetime in federal loans. A narrow exception applies to students currently enrolled in a program of study as of June 30, 2026, who have already received a Direct Loan before July 1, 2026. Professional degree programs (narrowly defined by ED to exclude education) face a separate $50,000 per year, $200,000 lifetime cap.
Aspiring teachers, school counselors, school psychologists, and district administrators who need graduate degrees may face significantly reduced federal borrowing capacity — potentially deterring entry into or advancement within the profession. Districts that use Title II-A funds to support teacher pipeline programs or reimburse advanced degrees should consult with their legal counsel about how these new limits interact with those spending plans. If a current staff member is mid-program as of June 30, they may qualify for the grandfathering exception — communicate this to HR and any staff pursuing graduate education now.
Indiana Is Among 27 States Opting Into Federal Scholarship Tax Credit Program Launching January 2027
Indiana is confirmed among 27 states that have given advance notice to the IRS of intent to participate in the Federal Scholarship Tax Credit (FSTC) program established by the One Big Beautiful Bill Act. Governor Braun announced Indiana’s participation in January 2026, and the Indiana Legislature subsequently passed a bill requiring annual opt-in. Beginning January 1, 2027, individual taxpayers in Indiana may claim a nonrefundable federal tax credit of up to $1,700 for donations to qualifying Scholarship Granting Organizations (SGOs). Indiana already operates a state-level SGO tax credit program; the federal credit stacks on top of it. Treasury and IRS have not yet finalized program rules; a forthcoming notice of proposed rulemaking is expected in 2026.
While the FSTC is not a direct threat to current federal formula funding, districts with significant enrollment of students from families earning up to 300% of area median income should be aware that scholarships funded through SGOs could begin flowing to private and supplemental providers beginning in 2027. This is a planning horizon item — not an immediate compliance concern — but federal program coordinators should begin tracking which Indiana SGOs are approved and how this interacts with the district’s existing McKinney-Vento, Title I, and private school equitable services obligations.
OMB Has Approved Only $438M of $765M Appropriated for IES in FY2026 — Evidence Base for ESSA Spending Narrows
A new Education Week analysis reveals that while Congress appropriated $765 million for the Institute of Education Sciences in FY2026, OMB’s published spending plan has only cleared $438 million — leaving $327 million in congressionally approved IES funds unaccounted for. This is on top of the previously reported $289 million in FY2025 IES funds at risk of lapsing by September 30. The National Assessment of Educational Progress (NAEP) has received its full appropriation and is spending as planned; however, research and evaluation programs — including Regional Educational Laboratories and the National Center for Special Education Research — remain severely underfunded.
ESSA requires that Title I and Title IV spending be grounded in evidence-based practices. As IES research funding is frozen and the What Works Clearinghouse pipeline slows, the universe of new, freshly rated evidence-based interventions will shrink. Districts should document the specific evidence tier (Tiers 1–4) supporting each major program investment now, using the WWC database and existing REL publications before those resources degrade further. This is especially important for districts in school improvement under Title I, where evidence requirements are most stringent.
119 K–12 Programs Now Under Interagency Agreement; Title I Formula Transition to DOL Still Unclear
As of April 1, 2026, the Education Department has struck 10 interagency agreements (IAAs) with five separate Cabinet-level agencies, transferring at least 119 K–12 and higher education programs according to an Education Week tracker. The Department of Labor holds the largest share. While formula funds including Title I, Part A are still expected to flow through the G5 system at ED for summer 2026, the longer-term administrative home for these programs under DOL — including monitoring, technical assistance, and competitive grant calendars — remains unsettled, particularly given Acting Secretary Sonderling’s recent start.
Indiana district federal program coordinators should maintain a current contact list for every federal grant they hold — including the assigned program officer, the administering agency (ED or DOL), and the relevant IDOE program lead. When agencies transfer, contacts change, and monitoring visits may be delayed or reassigned without notice. If your district has an open monitoring or compliance review scheduled with an ED program office, confirm it has not been transferred to DOL or another agency before the scheduled date.
IDOE Releases Summer 2026 School Funding Memo With Key Reimbursement Dates and Eligible Courses
IDOE’s Office of School Finance has released its annual summer school funding memo for summer 2026, detailing courses eligible for state reimbursement, the final cost report timeline, and key financial provisions. Districts must submit an Estimated Costs Report in the spring and a Final Costs Report in the fall to qualify for reimbursement. School leaders are also reminded of requirements to provide summer school for grade 2 students scoring “At Risk” and grade 3 students scoring “Did Not Pass” on the statewide IREAD assessment. Contact IDOE’s Office of School Finance for program-specific eligibility and financial questions.
Title I funds may be used to supplement summer school programming for eligible students, but state reimbursement and Title I spending must not be duplicative. Federal program coordinators and school finance directors should coordinate now on which summer school costs will be charged to Title I versus claimed for state reimbursement — this is a common audit finding. Ensure your Estimated Costs Report is filed by the posted IDOE deadline to maintain eligibility for state reimbursement funds.
McKinney-Vento Liaison Obligations Remain Unchanged Despite Federal Restructuring — IDOE Reaffirms District Duties
Despite the ongoing transfer of Education Department programs to other agencies and the proposed elimination of McKinney-Vento funding in the FY2027 MEGA Grant consolidation, current McKinney-Vento obligations under ESSA remain fully in effect. Every LEA is still required to designate a trained homeless liaison, ensure immediate enrollment for students experiencing homelessness, and make best interest determinations for school of origin decisions. IDOE has reaffirmed these obligations for Indiana districts for the 2025–26 school year. Title I, Part A set-aside requirements for homeless students also continue unchanged.
With McKinney-Vento targeted for elimination in the FY2027 budget, some districts may be tempted to reduce coordinator capacity — this would be premature and legally risky. McKinney-Vento is current law and obligations continue regardless of budget proposals. Indiana districts should confirm their designated liaison is trained, ensure their Title I set-aside documentation reflects homeless student services costs, and prepare for the possibility that if McKinney-Vento is eventually folded into a block grant, compliance documentation from prior years will be needed to demonstrate service delivery history.
Applications must be in final review stage now. Before submission, verify your district’s SAM.gov registration is active — expired SAM.gov registrations are the leading cause of disqualification. Confirm AOR (Authorized Organization Representative) roles in Grants.gov are current and that your e-signature authority is intact. Given the new student loan caps on graduate education, narrative sections about teacher pipeline development may resonate strongly with reviewers this cycle.
Active grantees: the June 1 midyear report is a hard compliance gate with less than 30 days remaining — treat this as your top federal compliance priority this week. Non-grantees: compile psychologist-to-student ratios, mental health referral data, and community partnership documentation now so you’re ready when a new competition posts with a typical 60–90 day window.
This is not a grant for districts — it is a tax credit program that will direct private donations to SGOs for student scholarships. However, federal program directors should understand it because it will affect equitable services planning and McKinney-Vento coordination. Families who receive SGO scholarships are still entitled to McKinney-Vento protections and Title I supplemental services if they qualify. Treasury final rules are pending; monitor IRS.gov for forthcoming guidance.
This state-funded initiative complements — and in some cases supplements — Title I literacy and tutoring spending. Districts should align local literacy plans with Indiana’s evidence-based reading instruction priorities to maximize competitiveness for Lilly-funded subgrants. Summer Learning Labs funding in particular can coordinate with Title I extended learning time programming. Check eCivis regularly; subgrant windows often open with 30–45 day application periods.
Protecting Your Evidence Base as IES Funding Stalls — What Districts Can Do Now
ESSA requires that school improvement, Title I, and Title IV spending be grounded in evidence-based practices rated at one of four tiers by the What Works Clearinghouse or equivalent review. As OMB continues to freeze IES funding — leaving the WWC’s pipeline of new reviews potentially stalled and Regional Educational Laboratory contracts at risk — districts face a narrowing window of fresh evidence to draw from for FY2027 and FY2028 program selections.
What districts should do now: Conduct a quick audit of the evidence tier supporting each major program currently funded under Title I or Title IV-A. Document the specific WWC review, practice guide, or REL report that justifies each investment, including the date it was published. Download and archive those resources locally — if IRS or WWC web infrastructure degrades, having local copies of the evidence documentation protects your audit record.
For new program investments being planned for 2026–27, prioritize programs already rated at Tier 1 or Tier 2 by the WWC rather than relying on a new review cycle that may not materialize. If your district is considering a program for which only Tier 3 or Tier 4 evidence exists, ensure your consolidated plan includes a local evaluation design — this demonstrates a good-faith effort to build the evidence base even when the federal infrastructure cannot do so. Indiana’s IDOE Literacy Center and the Midwest Comprehensive Center remain active resources for evidence guidance during this period.
Watch for any court filings or congressional action related to the OMB impoundment of $2 billion in education grants — legal pressure is building and a congressional hearing or court order compelling release of funds could come quickly. Also monitor Grants.gov for any new competitive grant notices tied to ED’s finalized AI Literacy and Workforce Readiness priorities — these competitions are overdue and could post any week. Indiana districts should watch for the IDOE summer school Estimated Costs Report window and any update from IDOE on the status of the federal ESEA flexibility waiver, which Secretary Jenner indicated would resume after the 2026 legislative session concluded.