We are now in the second week of the government shutdown and there does not seem to be any end in sight. We have all heard about the highly publicized shutdown of our national parks, government agencies, and the recent debacle over military death benefits. Last week we even covered how the government shutdown will affect your investments. However, one area that has not been discussed at great length is the impact that this shutdown will have on your student loans!
The Good News
The good news is that the shutdown has not currently affected your eligibility to qualify for any new federal financial aid. This would include any Federal Pell Grant, FSEOG, or Stafford student loans. That specific pot of money is still flowing. Your FAFSA will still be processed, and almost all of the Department of Education financial aid websites are still up and running.
More good news (well . . . “good” is a relative term here) is that Federal student loan servicers are still up and running. So you can still make all of your student loan payments and receive customer service if you have questions.
In 2009, the Department of Education contracted with private companies to manage the repayment of most Federal student loans, and since these private companies don't specifically fall under the wings of the Federal government, they are still functioning as normal. So yes, your student loan payments are still due. Bummer, I know!
Because the contracted student loan servicers are still operational, this means that you can still apply for a deferment or forbearance. These contractors have the authority to approve these options, so they can still assist you with that. If you are applying for a loan discharge due to medical disability or for student loan forgiveness due to teaching in a critical needs area, you are out of luck. You will hit a brick wall until the government is back up and running. Please see below for more bad news.
The Bad News
The pot of new financial aid is still flowing, but there are some things that have dried up until the government is back up and running. Consolidation loan applications are currently on hold. If you have a pending loan consolidation application through FedLoan Servicing, it won't be completed. They are also not currently accepting new applications. The website is still up, but I have been told that there are no new applications being processed.
If you have specific questions about your federal financial aid, you won't be able to get any customer service through the Department of Education. The ombudsman office is also shut down, so if you have a complaint or grievance, you will have to wait until they open back up to file that. Ironic huh?
More bad news is that delinquent loans are still being reported to credit bureaus and loans can still be turned over to collection agencies. Credit bureaus are independent agencies, and are also not affected by the government shutdown.
Why You Should Care
Unfortunately, the longer that this government shutdown lasts, the larger the amount of work will get. When federal workers return, they will be faced with an almost insurmountable hurdle to cross. The piles of paperwork and the backlog of work will likely be crippling. I would not be surprised if this shutdown, regardless of how long it lasts, impacts the availability of financial aid next year.
I know that we may not have much power to force our government to come to a resolution, but it might be worth a letter or phone call to your local congressman to express your concerns! This impact will have far-reaching implications, and I think we have only reached the tip of the iceberg when it comes to impacts we will feel on our student loans.
How do you think the government shutdown will impact student loan borrowers?