Will a government shutdown impact student loan payments? Here’s what to know
The United States federal government is expected to shut down on Sunday, Oct. 1 — the same day student loan payments will resume for the first time since March 2020.
Congress has been gridlocked over a spending bill for weeks. Although the U.S. Senate is expected to soon pass a bipartisan funding plan that will keep the government running until Nov. 17 so negotiations can continue, some Republicans in the U.S. House of Representatives have now refused to consider the bill.
At the same time, student loan borrowers are expected to resume making payments on their loans for the first time since March 2020. The resumption comes after a moratorium on payments was extended eight times.
Here’s what you should know about the impending shutdown, and how it will impact your student loan payments.
Will student loan payments resume during a shut down?
The short answer: Yes, you will still need to make payments on your student loans if the government shuts down.
“Even if Republicans needlessly shut down the government, loan payments will continue to be due,” a Department of Education spokesperson told McClatchy in an email.
During past shutdowns, student loan payments have not stopped. What’s different this time around is that student loan borrowers haven’t been required to make payments in more than three years.
While borrowers will still be responsible for making payments starting Oct. 1, they might have trouble getting in touch with department officials if the government shuts down. The department has yet to release the details of its plan for a shutdown, but it has historically been considered non-essential, meaning most employees will be furloughed.
“As it stands, the Administration plans to keep paying the student loan companies botching this effort to restart payments while furloughing the federal employees who are supposed to help borrowers when things don’t go according to plan,” Mike Pierce, executive director of the Student Borrower Protection Center, said in a Sept. 27 statement. “This will result in more borrowers receiving inaccurate and incorrect information with less oversight and fewer resources to fix problems. Forty million people are being thrown to the wolves. It will be a catastrophe.”
Officials expect that key activities at Federal Student Aid will continue for a few weeks if the government shuts down, but a longer-term shutdown could disrupt the return to repayment.
Why is the federal government going to shut down?
Congress is responsible for appropriating funds to federal agencies. When Congress doesn’t enact those appropriations, federal agencies can not spend money — including paying their nonessential employees — which triggers a “government shutdown.”
The federal government’s fiscal year begins Oct. 1 every year, which means Congress must draft and pass a spending bill by then. Just days ahead of the start of the 2024 fiscal year, Congress is still gridlocked, with no end in sight.
Most of the holdouts belong to the far-right Republican group known as the Freedom Caucus in the House.
In June, Congress passed and President Biden signed a bipartisan law that lifted the debt ceiling and set limits on annual spending for the next two fiscal years. Since the bill was passed, some Republicans in the House have become unhappy with it and now warn they will refuse to fund the government if it is not renegotiated.
There’s another problem in the House, too.
Because the Republicans hold such a small majority in the House — 222 members in a body that requires at least 218 votes for a majority — House Speaker Kevin McCarthy needs the support of almost all members to keep his leadership position. If he passes a bill that some in his party do not agree with, they can call for a vote on speakership, potentially ousting McCarthy from his position.
This story was originally published September 28, 2023 at 12:39 PM with the headline "Will a government shutdown impact student loan payments? Here’s what to know."
