Federal Guidance on AI Funding in U.S. Education Highlights Responsible Adoption

WASHINGTON, D.C., July 30, 2025 — Generative AI has made inroads into the educational system globally and continues to evolve with each passing day. Similar to a debate stirred by the use of Artificial Intelligence (AI) in creative sectors, such as media and entertainment, EdTech is also witnessing parallel narratives build on the use of AI.

There are isolated views that AI lacks in student engagement but a larger consensus is that its use in EdTech is helpful albeit boundaries must be drawn.

Educators and EdTech specialists, in their blog posts and interviews, have advocated that AI could be used to remove repetitiveness and time-consuming tasks in academic.

However, educators strongly believe that there could be no alternative to a teacher-student relationship. A great focus is on the need for AI to remain human-centric as well as ensure a robust teacher engagement.

Besides, work done by schools and colleges on an individual level to embrace AI, the first major government impetus for its growth in the education in US, came when President Donald Trump issued an executive order on April 23, accelerating AI education for American youth.

Federal Funding and Guidelines 

Educators till now were embracing AI in their curriculum on an individual basis, while the Federal funds have additionally supported integration of AI in education.

Following President Trump’s executive order, the US Department of Education on July 22 released new guidance, giving a nod to use of federal formula and discretionary grant funds to integrate AI into education.

Besides guiding schools on AI integration, the Department is exploring how AI can look inward and boost its own operations, including fraud detection and student aid services.

US Secretary of Education Linda McMahon said a careful implementation of AI can result into improved results. “AI has the ability to transform education and support improved outcomes for learners,” McMahon said.

“AI gives learning a personalized touch, hones critical thinking, and prepares students with problem-solving skills that are vital for tomorrow’s challenges. The guidance also emphasizes importance of a proactive role of parents and teachers in guiding the ethical use of AI and using it as a tool to support individualized learning and advancement.”

The Department has also announced a proposed supplemental grantmaking priority focused on accelerating AI literacy and computer science education.

States and districts are being encouraged to integrate AI into teaching, support professional development for educators, and use AI to personalize learning while reducing administrative workloads.

The proposed priority has been published in the Federal Register and would seek public comments for 30 days, while final priorities would be announced after feedback is reviewed.

EdTech Vendors Need Pedagogy Engagement

The single largest concern of the educators is that EdTech vendors design Large Language Models (LLMs) and other tools without teachers in mind. Educators say when vendors don’t understand how schools work or the different pedagogies involved, LLMs operate as a powerful pattern matching machine. On receiving a prompt, the AI scans its training data, the internet, and predicts the most statistically probable response. As a result, what the internet has to offer are never-ending, drab and low-level lesson plans. 

Notably, the Department in its guidance has outlined five principles for AI integration in education.

AI should enable teachers to seek guidance and not outsource, while it must support and not replace teachers is one of the government guidance. 

The guidance also calls for students to learn to evaluate AI outputs, use AI appropriately in social contexts, and develop digital citizenship.

In a step to make education inclusive, the guidance seeks AI systems to consider learners and educators with disabilities.

The guidance clearly states that AI tools must comply with federal privacy laws, including the Family Educational Rights and Privacy Act.

Global EdTech Market

As per industry data, the global edtech and smart classrooms market size is expected to grow from $214.73 Billion in 2025 to $445.94 Billion in 2029 at a compound annual growth rate (CAGR) of 20.0 percent. On a micro level, the EdTech industry grew at an annual rate of 5.39 percent.

EdTech has over two million people employed globally, which reflects an ongoing expansion and employment opportunities. The EdTech sector holds over 2700 patents and 2800 grants, with an annual patent growth rate of 22.12 percent, led by innovators in China and the USA. Among the top five country hubs for EdTech are the USA, India, UK, Canada, and Australia. The sector’s average investment per round is $14.1 million, with over 22,000 funding rounds closed.

The proposal for supplementary grantmaking has been published in the Federal Register for a 30-day public comment period, with final priorities to be announced after feedback is reviewed.

Inputs from Saqib Malik

Editing by David Ryder