The Evidence on DOE Outsourcing: How Interagency Agreements Are Restructuring the Department of Education

The U.S. Department of Education is undergoing a fundamental restructuring, not through a sweeping act of Congress, but through a bureaucratic mechanism known as "interagency agreements." Over the past year, the agency has systematically transferred the day-to-day management of its core functions to other federal departments. This strategy allows the administration to bypass the legislative branch, effectively dismantling the agency's operational footprint while retaining its statutory responsibilities on paper.[2][4]

The latest and most consequential phase of this reorganization was announced on June 16, 2026. Education Secretary Linda McMahon revealed four new agreements that shift the oversight of the nation's special education system to the Department of Health and Human Services (HHS). Simultaneously, the department's Office for Civil Rights and its student privacy enforcement division are being embedded within the Department of Justice (DOJ).[1][3]

These new partnerships bring the total number of interagency agreements executed since May 2025 to 14. Collectively, they redistribute the responsibilities of the 46-year-old department across six other federal agencies, including the Departments of Labor, Interior, State, and Treasury. The administration has framed the initiative as a practical step toward reducing federal bureaucracy and returning educational authority to state and local governments.[2][4][6]

The legal mechanism enabling this shift is the Economy Act, which authorizes federal agencies to enter into agreements to jointly carry out projects of common interest. Under these agreements, the Education Department officially retains its statutory authority and enforcement mandates. However, the actual administration of grants, technical assistance, and daily operations are outsourced to partner agencies.[2][8]

Earlier agreements set the template for this massive reorganization. The Department of the Treasury is currently absorbing the management of the $1.7 trillion federal student loan portfolio, and will eventually take over the administration of the Free Application for Federal Student Aid (FAFSA). Meanwhile, the Department of Labor has taken on a significantly expanded role in administering K-12 and postsecondary education grant programs, aligning them more closely with workforce development initiatives.[2][6]

Other specialized functions have also been dispersed. The Interior Department is now the primary point of contact for Indian Education programs, managing competitions and technical assistance for Native students. The State Department has assumed responsibility for monitoring foreign gifts and contracts reported by colleges and universities, framing the issue as a matter of national security.[2]

Proponents of the restructuring argue that these moves eliminate redundant layers of Washington bureaucracy. Secretary McMahon has stated that partnering with agencies that possess specific administrative expertise will streamline federal activities and better serve taxpayers. Conservative policy groups have praised the strategy, noting that it shrinks the department's footprint and fulfills a long-standing presidential promise to decentralize education policy.[6][8]

However, the strategy has provoked intense backlash from civil rights organizations, disability advocates, and educational institutions. Critics argue that the interagency agreements are a legally dubious attempt to dismantle a cabinet-level agency without congressional approval. They warn that splintering federal oversight across multiple departments will create profound confusion for schools, districts, and families trying to navigate federal requirements.[2][7]

The transfer of the Office of Special Education and Rehabilitative Services (OSERS) to HHS has raised particular alarm. Disability advocates argue that separating special education from general education oversight marginalizes students with disabilities. While federal officials insist that funding for the Individuals with Disabilities Education Act (IDEA) will remain secure, advocacy groups warn that the shift undermines the core foundation of federal disability policy.[5]

Similarly, civil rights groups have condemned the move to embed the Office for Civil Rights within the DOJ. The Education Department's civil rights attorneys have historically focused on providing technical assistance to schools to ensure compliance with laws protecting students from discrimination. Critics fear that shifting this function to the DOJ will replace a collaborative, educational approach with a purely prosecutorial model, potentially weakening systemic oversight.[3][7]

Higher education administrators are also bracing for logistical chaos. Financial aid professionals have expressed deep concern over transferring FAFSA and student loan management to the Treasury Department. They argue that agencies without deep, specialized experience in higher education policy will struggle to resolve the complex, urgent problems that routinely arise in student aid administration, risking disruptions for millions of students.[9]

The broader philosophical shift—particularly moving K-12 and higher education grants to the Department of Labor—has also drawn scrutiny. Child advocacy groups argue that this signals a view of education solely as a vehicle for workforce preparation. They contend that moving programs to the Labor Department diverts attention from the holistic developmental, social, and civic roles that public schools play in children's lives.[10]

Despite the mounting opposition, the administration shows no signs of slowing the transition. Federal officials have directed the involved agencies to provide biweekly briefings to lawmakers on the implementation of the agreements, though Congress has not passed legislation to block the moves. Meanwhile, a coalition of advocacy groups is pursuing litigation in federal court, arguing that the transfers violate the statutory mandates established when Congress created the department in 1979.[2][7]

Ultimately, the success or failure of these interagency agreements will redefine the federal government's role in American classrooms. Whether the restructuring results in a more efficient, decentralized system or a fragmented bureaucratic maze, the operational dismantling of the Department of Education marks one of the most significant shifts in federal education policy in half a century.[4]