Key Points
- Federal funding runs out December 11, 2026, and Congress must pass another stopgap or full-year spending bills to avoid a shutdown heading into the holidays.
- A December shutdown would not pause student loan payments, Pell Grants or FAFSA processing, but it could slow the IRS as it prepares for the 2027 filing season.
- Republicans are also weighing a third reconciliation bill before Democrats take over on January 3. No student loan changes have been proposed for it.
Democrats won control of both the House and the Senate on November 3, and the new Congress won’t be sworn in until January 3, 2027. That leaves Republicans a short window of unified control to take action – and they have some pressing items that need to be addressed next month. Our breakdown of what the Democratic sweep means for student loans highlights what we expect will happen next year.
There is a critical must-pass item coming up: government funding. Lawmakers return today and have a December 11 deadline, and missing it would trigger a government shutdown that hits student loans and financial aid right before Christmas.
Some Republicans also want one last party-line bill before they lose power, which could touch the debt ceiling and taxes.
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When Does The Government Shut Down If Congress Doesn’t Act?
Federal funding expires after December 11, 2026. The stopgap law signed September 2 keeps agencies running at fiscal year 2026 levels until then. Congress has to pass full-year spending bills or another continuing resolution before that date. Until it does, Education Department programs run at last year’s funding levels.
House and Senate appropriators had been working toward a full-year deal, but that path is unclear. Another short-term continuing resolution looks like the most likely outcome. A full-year education bill matters for families because it sets money for Federal Work-Study, TRIO and Pell Grants, and the House version would end subsidized student loans to pay for a Pell Grant increase.
The politics cut both ways. Funding deadlines are one of the few checks Democrats will hold over President Trump next year, so Republicans have a reason to lock in longer-term funding now. Democrats have the opposite incentive, since a short deadline gives them leverage once they hold the gavels and pursue their Pell Grant and student loan agenda.
| Date | What Happens | Why It Matters |
|---|---|---|
| Nov. 9, 2026 | Congress returns for the lame duck session | Republicans’ last weeks controlling both chambers |
| Dec. 11, 2026 | Stopgap government funding runs out | Shutdown starts without a new spending bill |
| Jan. 3, 2027 | New Congress is sworn in | Democrats take control of the House and Senate |
| Jan. 15, 2027 | Fourth-quarter estimated taxes due | Payments are still due during a shutdown |
| Late Jan. 2027 | IRS usually opens tax filing season | The 2026 season opened January 26 |
| As Soon As Feb. 2027 | Federal debt limit could be reached | Main driver of a third reconciliation bill |
What Happens To Student Loans, Pell Grants And The FAFSA If There Is A December Shutdown?
Federal student loan payments must continue due during a government shutdown, and Pell Grants and Direct Loans keep flowing. The Education Department pays for those programs through mandatory and carryover funding, so spring semester disbursements in January should go out on schedule. That’s what happened during the 43-day shutdown in fall 2025, when student loan payments and financial aid disbursements continued.
Student loan servicers are private contractors, so they stay open. They keep processing payments, deferments and income-driven repayment plan applications. Federal workers who stop getting paychecks can recertify their income to lower their student loan payment, which an unexpected benefit.
Work that needs an Education Department employee is what stops. That includes final PSLF discharges, Direct Consolidation Loan approvals and the Federal Student Aid ombudsman. In fall 2025, the department furloughed about 87% of its staff and laid off 466 employees during the shutdown. Its court-ordered income-driven repayment backlog reports were also delayed until after it reopened.
The FAFSA stays open, and processing is largely automated. Help desk support and issue resolution slow down, which matters because some state deadlines arrive fast. Texas has a January 15, 2027 priority date, according to our list of 2027-28 FAFSA deadlines.
How Would A Shutdown Affect The IRS And The 2027 Tax Filing Season?
A December shutdown would hit the IRS while it updates forms and tests systems for the 2027 tax filing season. During the October 2025 shutdown, the agency used leftover Inflation Reduction Act money to stay fully staffed for five business days. It then furloughed about 34,000 of its 74,000 employees and kept filing season preparation running as much as possible.
The cushion is smaller now. The fiscal 2026 spending deal cut the IRS budget to $11.2 billion and rescinded $11.7 billion of the roughly $20.7 billion left from the Inflation Reduction Act. The current stopgap protects what remains from another rescission. We haven’t seen a Treasury contingency plan for this deadline yet, so it’s unclear whether the IRS would use that money again. Our 2027 filing season overview covers what else changes this year.
Tax obligations don’t pause because the government shutdown. The fourth-quarter estimated payment is still due January 15, 2027. The last long shutdown didn’t push back the start of filing season either, and the IRS opened the 2026 season on January 26 as our IRS refund calendar shows.
What Happened During The 2018-2019 Holiday Shutdown?
The closest precedent began December 22, 2018, and lasted 35 days. The IRS was shut down, but the Education Department wasn’t, because its fiscal 2019 funding had already passed. FAFSA processing and Pell Grant payments ran normally that winter. This time both agencies run on the same stopgap, so both would close together.
The IRS still opened filing season on January 28, 2019 and paid refunds, after earlier shutdown plans had held them. It recalled about 46,000 employees to work without pay. Service suffered anyway, and the IRS answered only 48% of calls in the first week of filing season, according to the National Taxpayer Advocate’s report.
That backlog is one reason some tax refunds run late after a shutdown.
Could Republicans Pass A Third Reconciliation Bill Before January?
It’s possible, but the votes and the calendar are tight. Reconciliation lets a bill pass the Senate with a simple majority, and Republicans used it in 2025 One Big Beautiful Bill Act (OBBBA) that created RAP and capped Parent PLUS borrowing. Senate Majority Leader John Thune has called another reconciliation bill difficult, and he can lose only three Republican votes.
Ideas floated so far include Iran war funding, a debt limit increase, voting restrictions, and cryptocurrency policy. The debt limit drives most of it. Raising the limit through the end of President Trump’s term would keep Democrats from using it as leverage in 2027, and the limit could be reached as soon as February. Our coverage explains what happens when the U.S. hits the debt ceiling.
The process is complicated. The House-passed budget resolution includes no tax instructions, so the Senate would need to rewrite it and send it back. Attendance is another headwind, since retiring and defeated members may not stay through December. Tax options that fit reconciliation rules include extending expiring provisions, gambling losses, digital assets and retirement savings.
It’s unclear which, if any, would make the cut, so plan your 2026 return around the deductions already in law.
No student loan proposals are part of the reconciliation talk. The 2025 law already made the big changes, and the current repayment plan options stay in place.
What Should Families And Borrowers Do Before December 11?
- Keep paying your student loans. Servicers stay open in a shutdown. Federal workers who lose pay should recertify income instead of using forbearance.
- File the 2027-28 FAFSA now. Submitting before December 11 gives you time to fix problems while help desks are fully staffed, and our step-by-step FAFSA walkthrough covers every question.
- Expect delays on consolidation and PSLF approvals. Final sign offs require the Department of Education.
- Get ready to file early in 2027. E-file with direct deposit, and compare options in our best tax software rankings.
- Plan around current law. Our analysis of what a Democratic Congress can change shows most proposals still need President Trump’s signature.
Frequently Asked Questions
Will My Student Loan Payments Pause If The Government Shuts Down?
No. Federal student loan servicers are contractors and stay open during a shutdown, so payments remain due. Missed payments can still be reported to credit bureaus during a shutdown.
Will A December Shutdown Delay My 2027 Tax Refund?
A short shutdown probably wouldn’t, since the IRS usually opens filing season in late January. A long one could slow phone help and correspondence, as it did in 2019. Refunds that claim the Earned Income Tax Credit are held until mid-February under the PATH Act refund rules.
Will Pell Grants Still Pay Out For The Spring Semester?
Yes. Pell Grants and Direct Loans are funded outside annual appropriations, so they kept disbursing during the 2025 shutdown. Delays are more likely for problems that need Education Department staff to resolve.
Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.