Will Federal Student Loans Be Impacted by the Government Shutdown?

Student Loan Consolidation

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Government shutdowns can be a scary thing for a large portion of the population. Many people rely on government assistance and benefits for survival. With the shutdown happening on December 22, 2018, it left many wondering what comes next. This is especially true for people with student loans.

No one knows when the government shutdown will end. Congress and President Trump seem to be at odds with each other about funding for the border wall. Is it a good idea? A waste of money? Most have the opinion on the subject. But what does it mean for the average citizen? The reality is: not much.

A government shutdown essentially means non-essential government employees are sent home until a deal is made. All federal agencies have workers and operations that aren’t essential. Most essential functions will continue on as normal. Does that have any impact on student loans?

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Federal Student Loans and the Shutdown

The federal government owns over $1.53 trillion dollars’ worth of student loans. Of course, many of the millions of Americans with this type of debt may wonder what happens next. Will there be any disruption? Is obtaining loan forgiveness now out of the question? Are you expected to continue paying your student loans?

While there might be some minor issues, student loans shouldn’t be much affected by the shutdown. Again, the federal government does own the debt, but they’ve outsourced most of those jobs. Private contractors like Navient and FedLoan Servicing handle the day-to-day operations.

While these private contractors do handle the student loans for the government, they are no federal workers. That means the shutdown will not impact things like billing or processing. You’ll still receive notices and applications will be processed. Most of the operations happen within these agencies and not at the federal level.

Will the Department of Education Shut Down?

While most of the process involving student loans are taken care of by a third party, the Department of Education will still be in charge. For example, to receive a discharge of student loans due to a disability must go through the department for approval. This includes student loan forgiveness due to school closures or fraudulent cases.

The private contractors will look at the application, but the final discharge must be made by department officials. Settlements, defaulted loans, FAFSA applications, and other processes may need department approval as well. Still, the shutdown is not expected to affect any of this. It’s a partial shutdown and essential entities will still be required to show up for work.

The operations within the Department of Education will continue as normal. More specifically, that department was already funded through different legislation. They will be unphased by the shutdown.

What about the IRS?

While most of the process involving student loans will remain untouched, there is one area that will likely see a delay. The U.S. Department of Treasury will be directly impacted by the shutdown. More specifically, a large number of people working for the IRS could be furloughed until the shutdown is over. That can mean delays well into tax season.

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These delays can include tax return processing and refunds. If you’re applying for income-driven repayment plans, you can see a major delay. Also, if you need to contact the IRS for any reason, there may be long phone wait times. Tax season is already stressful enough without the shutdown hampering operations.

For the most part, the shutdown will not affect your student loans. Everything should continue as normal. Keep making your monthly payments! May 2019 be the year we finally see a solution to this growing crisis.

Last modified: January 14, 2019