Will Your Student Loans Be Impacted By A Government Shutdown?
A potential government shutdown raises concerns for millions of Americans with federal student loans. While the core functions of FAFSA processing and federal student aid disbursement are expected to continue, significant disruptions and delays are likely in other areas, potentially leaving borrowers facing unresolved issues with limited recourse.
FAFSA & Federal Student Aid: Core Functions Expected to Continue, But Support might potentially be Limited
The Department of Education is expected to maintain the flow of FAFSA applications and federal student aid, even with a shutdown. Though, the staff responsible for addressing complex issues and providing individual assistance are highly vulnerable to furlough. This means students and families encountering problems with the FAFSA process may find themselves without support to resolve them, potentially facing significant hurdles.
Student Loan Forgiveness Programs Face potential Delays
Borrowers pursuing federal student loan forgiveness through programs like Public Service Loan Forgiveness (PSLF), Total and Permanent Disability discharge (TPD), and Borrower Defense to Repayment could experience processing delays. Department of Education staff are integral to the implementation and approval of these programs, and a shutdown would likely halt or slow their work.
This comes at a particularly challenging time for many borrowers. The TPD discharge program has been struggling with administrative issues and delays throughout the year following a transition to a new processing system. Furthermore,the Department of Education is currently facing a class action lawsuit regarding ongoing delays related to Income-Driven Repayment (IDR) student loan forgiveness and the PSLF Buyback program – which allows borrowers to qualify for forgiveness by making a lump sum payment for past non-qualifying deferments or forbearances. A shutdown would likely worsen these existing problems, extending wait times for relief.
Dispute Resolution Services Will Be Substantially Impacted
borrowers with disputes regarding their federal student loans – such as misapplied payments or wrongly denied forgiveness – will also be affected. The Department of education’s contingency plan indicates a likely furlough of most, if not all, staff within the Feedback unit at the Office of Federal Student Aid and the Ombudsman group. These units are responsible for handling borrower disputes.
As of August, the FSA Feedback unit already had a significant backlog of 41,507 open cases, while the Ombudsman group was managing 27,006. A government shutdown is expected to dramatically increase these backlogs,leaving borrowers with unresolved issues for an extended period.
Sources:
* https://www.ed.gov/sites/ed/files/about/shutdown/contingency-plan-2024.pdf
