Will Maximus and Its Subsidiary AidVantage See Cuts?

Maximus Inc., the parent company of federal student loan servicer Aidvantage, is facing growing financial and existential threats as the Trump administration completes a radical budget proposal that would slash Medicaid by hundreds of billions of dollars and cut the U.S. Department of Education in half. These proposed changes could gut the very federal contracts that have fueled Maximus's revenue and investor confidence over the last two decades. Once seen as a steady player in the outsourcing of public services, Maximus now stands at the edge of a political and technological cliff.

The proposed Trump budget includes a plan to eliminate the Office of Federal Student Aid and transfer the $1.6 trillion federal student loan portfolio to the Small Business Administration. This proposed restructuring would remove Aidvantage and other servicers from their current roles, replacing them with yet-unnamed alternatives. While Maximus has profited enormously from servicing loans through Aidvantage—one of the major federal loan servicers—it is unclear whether the company has any role in this new Trump-led student loan regime. The SBA, which lacks experience managing consumer lending and repayment infrastructure, could subcontract to politically favored firms or simply allow artificial intelligence to replace human collectors altogether.

This possibility is not far-fetched. A 2023 study by Yale Insights explored how AI systems are already outperforming human debt collectors in efficiency, compliance, and scalability. The report examined the growing use of bots to handle borrower communication, account resolution, and payment tracking. These developments could render Maximus’s human-heavy servicing model obsolete. If the federal government shifts toward automated collection, it could bypass Maximus entirely, either through privatized tech-driven firms or through internal platforms that require fewer labor-intensive contracts.

On the health and human services side of the business, Maximus is also exposed. The company has long served as a contractor for Medicaid programs across several states, managing call centers and eligibility support. But with Medicaid facing potentially devastating cuts in the proposed Trump budget, Maximus’s largest and most stable contracts could disappear. The company’s TES-RCM division has already shown signs of unraveling, with anonymous reports suggesting a steep drop-off in clients and the departure of long-time employees. One insider claimed, “Customers are dropping like flies as are longtime employees. Not enough people to do the little work we have.”

Remote Maximus employees are also reporting layoffs and instability, particularly in Iowa, where 34 remote workers were terminated after two decades of contract work on state Medicaid programs. Anxiety is spreading across internal forums and layoff boards, as workers fear they may soon be out of a job in a shrinking and increasingly automated industry. Posts on TheLayoff.com and in investor forums indicate growing unease about the company’s long-term viability, particularly in light of the federal budget priorities now taking shape in Washington.

While Maximus stock (MMS) continues to trade with relative strength and still appears profitable on paper, it is increasingly reliant on government spending that may no longer exist under a Trump administration intent on dismantling large parts of the federal bureaucracy. If student loan servicing is eliminated, transferred, or automated, and Medicaid contracts dry up due to funding cuts, Maximus could lose two of its biggest revenue streams in a matter of months. The company’s contract with the Department of Education, once seen as a long-term asset, may become a political liability in a system being restructured to reward loyalty and reduce regulatory oversight.

The question now is not whether Maximus will be forced to downsize—it already is—but whether it will remain a relevant player in the new federal landscape at all. As artificial intelligence, austerity, and ideological realignment converge, Maximus may be remembered less for its dominance and more for how quickly it became unnecessary.

The Higher Education Inquirer will continue tracking developments affecting federal student loan servicers, government contractors, and the broader collapse of the administrative state.

Medicaid Cuts Threaten Medical and Mental Health Providers Dependent on Medicaid — and Graduates of Online “Robocolleges”

As states grapple with budget shortfalls and federal funding shifts, Medicaid—the nation’s largest public health insurance program—faces potential cuts that could severely impact medical and mental health providers who depend heavily on Medicaid reimbursements. This looming threat not only jeopardizes access to critical healthcare services but also risks destabilizing the very providers that serve some of the most vulnerable populations in the United States.

Medicaid: A Lifeline for Providers and Patients

Medicaid covers over 80 million Americans, including low-income families, people with disabilities, and seniors. For many medical and mental health providers, Medicaid reimbursements constitute a significant portion of their revenue. Clinics in underserved areas, community health centers, and behavioral health providers often rely on Medicaid funding to stay afloat.

The federal-state partnership funds Medicaid, but states have discretion in determining eligibility and reimbursement rates. When states face fiscal pressures, cutting Medicaid funding or tightening reimbursement rates is often considered a quick fix.

The Domino Effect of Medicaid Cuts

Cuts to Medicaid funding translate directly into lower payments to providers. Unlike private insurance, Medicaid rates are often already low. Further reductions can mean providers lose money on each Medicaid patient treated.

This financial strain can force clinics and mental health programs to:

• Reduce services or limit patient intake

• Cut staff, including essential behavioral health professionals

• Close locations, especially in rural or underserved areas

These outcomes create barriers for patients who already face challenges accessing care. Individuals with serious mental illness, chronic conditions, or disabilities are particularly at risk of losing consistent care.

Impact on Medical Education and Training

Medicaid cuts can also disrupt medical and mental health education programs affiliated with teaching hospitals and universities. These programs often serve Medicaid patients in their clinical training sites. Reduced funding means fewer training opportunities for students and residents, potentially exacerbating workforce shortages in critical health fields.

Mental Health Providers: A Vulnerable Sector

Mental health providers are especially vulnerable to Medicaid cuts. Behavioral health services are frequently underfunded compared to general medical care. Medicaid often serves as the primary payer for mental health treatment, including therapy, psychiatric care, and substance use disorder programs.

Cuts could reduce access to outpatient therapy, crisis intervention, and community-based services, worsening outcomes for people with mental health conditions. The COVID-19 pandemic underscored the urgent need for robust mental health infrastructure, and cuts threaten to reverse progress made.

Robocollege Graduates: An Overlooked Impact

Another group at risk from Medicaid cuts are recent graduates of online for-profit colleges, sometimes disparagingly called "robocolleges." These institutions often produce graduates with degrees in healthcare-related fields such as nursing, health administration, or medical assisting.

Many of these graduates rely on Medicaid-funded healthcare settings for employment. Clinics and community health centers that serve Medicaid patients are common entry points for these workers. Cuts in Medicaid funding could lead to reduced hiring or layoffs in these settings, disproportionately affecting graduates struggling to launch their careers.

Moreover, the limited job security and lower wages typical of such entry-level positions compound the economic challenges for these workers, many of whom already face significant student debt and limited career mobility.

Broader Social and Economic Consequences

Limiting access to healthcare and mental health services has far-reaching consequences beyond individual health. Untreated illness can lead to increased hospitalizations, emergency room visits, and interactions with the criminal justice system. These outcomes are far more costly to society than preventative or ongoing care.

Policy Recommendations

To protect the health and stability of vulnerable populations, the providers who serve them, and entry-level healthcare workers including robocollege graduates, policymakers should:

• Avoid disproportionate Medicaid cuts that undermine care quality

• Invest in community health centers and behavioral health programs

• Maintain adequate reimbursement rates to sustain provider networks and employment

• Support integrated care models that combine physical and mental health services

• Consider workforce development initiatives that support graduates entering Medicaid-funded care settings

Medicaid is a cornerstone of America’s healthcare safety net, especially for medical and mental health providers serving those in greatest need. Cuts to Medicaid funding threaten not only provider viability but the health and well-being of millions—including the newest healthcare workers striving to build careers. As budget debates continue, preserving and strengthening Medicaid funding is essential to ensuring equitable access to quality care and supporting the providers and workforce on the front lines.

University of Michigan Implements Proactive Measures in Response to Federal Funding Cuts

In response to potential federal funding reductions, the University of Michigan has announced a series of strategic measures aimed at protecting its financial stability. Despite the university’s strong financial standing, recent federal directives—specifically, a legal order to cease work on a multimillion-dollar project—have prompted the university to prepare for additional funding challenges that may arise in the near future.

As part of these efforts, the university is introducing new requirements related to hiring, budget management, and spending. These steps include:

1. Hiring Review Process:

   • All new hires for both regular and temporary positions (faculty and staff) will require approval from deans and executive officers, followed by a review from the president or executive vice presidents (EVPs).
   • The university will require approval for replacement, incremental, temporary, and contract positions. However, offers already extended to candidates will be honored.
   • Michigan Medicine will continue with its current hiring review process.

2. Non-Essential Expenditures:

   • Non-payroll commitments over $50K will require written approval from the president or EVPs before being processed, and this approval must accompany requisitions or contract requests to procurement services.
   • Additionally, units are encouraged to voluntarily review other non-essential expenditures, such as travel, conferences, and consultant fees, to identify potential savings.

3. Capital Spending:

   • Capital projects—including new buildings and infrastructure projects—will be closely reviewed. Projects that require regental approval will continue to be evaluated by the university's capital council, while ongoing projects will proceed as planned.

The university also noted that Michigan Medicine will receive separate, specific guidance regarding these measures.

In a joint letter, President Santa J. Ono, Executive Vice President Geoffrey S. Chatas, Provost Laurie K. McCauley, and Executive Vice President for Medical Affairs Marschall S. Runge urged faculty and staff to collaborate and engage thoughtfully in these efforts. The university’s leadership emphasized the importance of these proactive measures in ensuring continued institutional success amid uncertain federal funding.

Republican Plan for $2T in Budget Cuts, Removal of Government Guardrails, and Tax Breaks for Billiionaires (Govtrack.us)

The Republican Resolution (HCR 14) to establish $2 Trillion in budget cuts and more tax breaks for the rich is available here.  While those deep cuts are planned, the GOP is requiring an increase in the debt limit so that American billionaires are rewarded. These rewards are not just in the form of tax cuts for the rich, but in the removal of financial and environmental guardrails.  At the same time, the Resolution calls for increased oversight by the Federal Government in other areas of concern by the right wing US government. 

Austerity and Disruption

With a concerted effort now to reduce government spending, higher education leaders should expect reduced state and federal support in 2025 and beyond, with demographic and climate trends also darkening the clouds. Workers and consumers should also see it all coming. 

Austerity has already begun. In July 2024, the Pew Foundation reported that state budgets were facing cuts as Covid-era funds ended.  The most notable cuts are coming to the California State University System, which is expected to reduce its budget by hundred of millions of dollars. But several other states are feeling the pinch. 

Austerity for higher education is also likely to increase at the state level as baby boomers reach advanced age and require more medical attention and nursing home care. How this demographic cliff of old age, reduced fertility, and fluctuating populations plays out will vary greatly across the United States. 

Some Southern states, like Florida, Texas, Georgia, and North Carolina, have improved financially despite threats from climate change. Anti-tax, anti-regulation, and anti-union laws make them friendly to corporations in search of relocation and a better deal. States in the West, like Utah, Arizona, and Nevada, are are also likely to continue thriving. Besides climate change, which is profoundly disruptive but takes generations to notice, mass deportations could affect their economies quickly--if the Trump Administration's threats can be carried out. 

Alaska, New Mexico, Oregon, and several states in the Midwest and Atlantic regions will face more austerity as their populations remain stagnant or decline and folks move to states with lower housing costs and less taxes, leaving others to die. Deaths of despair among youth will continue to ravage them. What happens with these failing states in the future is anyone's guess. One would hope higher education leaders would have solutions and be courageous enough to act, or at the very least allow those with solutions to talk.