What the Proposed FY26 Budgets Mean for EdTech Innovation and Access

The White House’s proposed FY26 budget proposal is big news not just for schools and colleges, but also for the companies that build tech tools for learning.

The government proposes to spend $66.7 billion on the Department of Education. This is a $12 billion  (15.3%)  decrease from the FY25 level. The administration frames this move as a responsible “winding down” of the extra money that was given out during the pandemic. The proposal is far from final and will go through intense congressional scrutiny. But even as a draft, it gives a strong indication of what educational institutions and edtech providers can expect and where they might be forced to adapt.

4 Key Dynamics to Watch Out for in the Proposed FY26 Budget

For organizations operating across the K-12, higher ed, CTE, and workforce training sectors, here are four key dynamics worth watching.

1. K12 Schools – Less Funding from the Top, But Local Innovation Could Keep Moving

For K-12 institutions, Title I funding remains, but the budget proposes eliminating the 21st Century Community Learning Centers program, which funds after-school and summer learning.

Impact on schools:

• This may hurt low-income districts that rely on this funding for after-school programs and remedial education.
• Districts must now rely on state-level innovation and tech tools.

What does this mean for K12 edtech?

State and district-level investments in digital learning tools and classroom technology, many of which were accelerated during the pandemic, aren’t likely to vanish overnight. This is because K-12 schools have become more accustomed to leveraging digital learning tools and pursuing state-driven innovation, especially
post-pandemic. The drawdown of ESSER funds was largely anticipated, and many districts have since begun
re-prioritizing sustainable investments that tie closely to learning outcomes. That said,

• Sales to schools may become more competitive and dependent on demonstrating long-term impact rather than short-term novelty.
• Expect more focus on sustainable, results-driven tools that fit within tighter budgets.
• Tools must prove their value to learning outcomes, especially in literacy, STEM, and classroom productivity.

2. Higher education: There’s a Bigger Push for Job-Focused Programs

Proposed cuts include:

• Elimination of the Federal Supplemental Educational Opportunity Grant (FSEOG)
• An aggressive $980 million cut to Federal Work-Study (FWS), leaving it at $250 million
• End of programs like TRIO and GEAR UP, which help underrepresented students.
• A potential drop in the Pell Grant maximum to $5,710 (from $7,395).

Impact on institutions:

• These cuts hit low-income and working-class students the hardest.
• Fewer grants = less access to higher education, especially for underrepresented groups.
• Colleges already struggling with enrollment and rising costs will feel more pressure.
• May push institutions to cut costs, embrace online program expansion, and promote alternative credential pathways.

Opportunities for edtech:

• Providers offering tools that support student retention and offer stackable credentials will be
  well-positioned.
• EdTech companies that help colleges operate efficiently and deliver career-ready training may see rising interest.

3. CTE: Funding Is Not Growing, So States Will Have Higher Expectations

Funding level:

• CTE State Grants remain at $1.4 billion with no increase despite rising costs.
• $10.2 million has been allotted for national CTE programs — a 14% cut from previous levels.

Why this matters:

• CTE is becoming more important in preparing students for real-world jobs, and a flat budget is effectively a cut, due to inflation and growing demand.
• The cut to national programs may reduce innovation grants and collaboration. States and districts will now be pickier about what tools and content they fund.

What does it mean for edtech companies?

• States will look for cost-effective, industry-integrated solutions.
• Funding cuts to innovation programs may open space for private sector tools that are scalable and interoperable.
• Tools for virtual labs, skills-based credentialing, and workforce-aligned content will be in demand.

4. Workforce Development: Short-Term Credentials Are in Focus

Proposed development:

• Introduction of “Workforce Pell” lets Pell Grants be used for short-term credential programs.
• Continued support for reskilling and work-based learning.
• But programs like TRIO and GEAR UP that helped disadvantaged students succeed may disappear.

Why they matter:

• “Workforce Pell” could reshape post-secondary education by supporting short, high-impact training.
• It opens doors for non-traditional learners and career switchers.
• But without support programs, learners from vulnerable backgrounds might struggle to complete these credentials.

What does it mean for edtech companies?

• Companies enabling skills-based learning and career-aligned pathways may become key partners.
• However, the end of support programs like TRIO and GEAR UP raises concerns about equity and access for disadvantaged learners. Hence, equity-focused design and learner support features will matter more than ever.

A Wait-and-Watch Moment for EdTech

The proposed FY 2026 budget doesn’t mark the end of federal investment in education, but it does signal a reframing of that investment.

From broad-based support to narrower, efficiency- and workforce-focused interventions, the administration appears to be shifting its priorities from “how many are served” to “what results are achieved.”

While the proposed cuts may generate immediate concern, especially among institutions serving low-income learners, they also offer a moment of recalibration for the private sector. EdTech companies that can help institutions stretch limited resources, meet accountability metrics, and connect learners to careers will remain critical.