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Impact of government shutdown on student loans

Impact of government shutdown on student loans

The potential for a government shutdown on October 1st could not come at a worse time as it coincides with the resumption of federal student loan payments for 44 million Americans. The resumption of student loan payments has already caused confusion and anxiety among borrowers, and a government closure would only exacerbate the situation. Analysts believe that the likelihood of a shutdown has increased to 90%, and if it does happen, student loan payments will still be due and interest will still accrue.

The impact of the shutdown on student loan borrowers will depend on its length. If it is a short-term shutdown, key activities at the Federal Student Aid may continue for a couple of weeks, but a prolonged shutdown could significantly disrupt the return to repayment efforts. Additionally, the Education Department may have fewer workers to answer questions and help borrowers solve problems, as more than 90% of department employees will be furloughed. This comes at a time when there have been numerous changes to student loan repayments, terms, and servicing companies, leading to confusion among borrowers.

Furthermore, the shutdown could create further confusion about new repayment plans, such as the recently introduced SAVE plan, and the 12-month grace period for repayment. Student loan forgiveness is another area of uncertainty, as President Joe Biden’s widespread forgiveness plan was blocked by the Supreme Court, but his administration has forgiven loans through other means. This could result in borrowers encountering problems with their servicers, such as incorrect payment information or difficulties understanding their new repayment obligations. The shutdown may also cause delays for those applying for federal aid or seeking loan forgiveness.

In addition to the impact on student loan borrowers, a government shutdown would also affect millions of federal workers, with some being furloughed and others working without pay. It could also lead to further disruptions in air travel and other sectors. Despite these challenges, borrowers who need assistance with payment plans or determining their total owed amount can seek help from studentaid.gov or contact their servicer.

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