Debt Ceiling Watch: What U.S. Default Would Mean for Education

U.S. Treasury Secretary Janet Yellen has warned that the country is at risk of “economic calamity” unless lawmakers come up with a deal to raise the $31.4 trillion debt ceiling. Failure to do so would lead the U.S. to default on its financial obligations as soon as June 1, she said. It would be the first time in history that America has been unable to pay its bills.

Experts say default could trigger an economic recession and the loss of millions of jobs. California stands to lose as many as 841,000 jobs, according to a recent analysis from Moody's Analytics. 

Among other things, the U.S. government could find itself unable to distribute billions for special education, high-needs students, and English learners. A prolonged default could force many school districts to lay off staff or cut educational programs.

Roughly 8-10% of school spending comes from the federal government. If the stock market tanks, teacher pension funds would also take a deep hit. The state and school districts would have to step up to the plate to meet pension obligations.   

“The results will be so catastrophic,” Sarah Abernathy, executive director of the Committee for Education Funding, told EdWeek. “There’s a ton of uncertainty, and none of the outcomes are good.” 

Default would also increase costs for higher education and could disrupt federal grants, research, and financial aid.

Debt ceiling negotiations are ongoing. President Joe Biden and House Speaker Kevin McCarthy (R-CA) met on Monday for over an hour, but were once again unable to hash out a deal. Talks will continue in the coming days.