Washington, D.C. - The U.S. federal government was shut down on December 22, 2018 and Congress and the President have not found a solution to re-open the government. As of January 11, 2019, the government extended its shutdown for over three weeks, which is the longest on record for the U.S. government.
If the government remains shut down for a long period of time, how will this impact the federal student loan program?
First, because the federal student loan program is dependent on private contractors such as Nelnet and Navient, many of these activities will remain unaffected. Therefore borrowers can still pay their student loans back and contact their loan servicer to enroll in their student loan repayment plan. If the government stays does not re-open for a longer period of time, there may be some activities that could be impacted, particularly activities that need to be reviewed by the Department of Education. These activities include FAFSA applications, which tends to get busier during the Spring months. While we don't anticipate the shutdown to last that long, we will monitor this situation if negotiations continue to break down between the President and Congress.
We've obtained the U.S. Department of Education's official memorandum to the Office of Management and Budget, which attempts to explain the impact of a government shutdown on U.S. Department of Education programs. Of note to our readers and clients is the impact of the shutdown on the federal loan and grant programs.
See page 3 of the memo for more information.
The memo, written by Education Secretary Betsy Devos, states that: "As a result of the permanent and multi-year appropriations, Pell Grants and student loans could continue as normal for some time. Staff and contractors associated with these areas will continue to work, and only skeletal program operations would continue under the “significant damage” standard. Should multi-year, unobligated funding be available, these funds could help cover costs for a period of time."
In other words, it really is going to depend on the length of the shutdown before we see any noticeable or significant impact on the federal loan programs. We will continue to monitor this situation and hope that a resolution is reached soon in Washington, D.C. to find a deal on government funding.
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