Government Shutdown: Implications for Student Loans and Federal Education Programs

As the specter of a government shutdown looms, the U.S. Department of Education has clarified that student loan borrowers will still be required to make their repayments. This announcement comes as part of a contingency plan released on September 28, outlining the department’s operations in the event of a shutdown on October 1. While the continuity of loan repayments is assured, the potential disruption to federal services raises concerns for borrowers and students alike.

Student Loan Repayments Continue Amid Shutdown

The Education Department has made it clear that individuals with student loans must continue to meet their repayment obligations, even if the government shuts down. “Student loan borrowers will still need to pay their bills during a shutdown,” stated Persis Yu, managing counsel at Protect Borrowers, an advocacy group focused on student loan issues. However, she cautioned that borrowers may face significant challenges in resolving issues with their loan servicers due to a substantial reduction in staff during a shutdown.

Approximately 2,100 of the Education Department’s 2,400 employees are expected to be furloughed, including most staff from the Office of Federal Student Aid. This reduction in personnel could hinder borrowers’ ability to seek assistance or resolve errors, which are not uncommon in the student loan system.

Impact on Federal Aid and Student Programs

Despite the challenges posed by a potential shutdown, the Education Department has indicated that federal aid programs, such as Pell Grants and Federal Direct Student Loans, will continue to operate. These programs are funded through mandatory spending, which does not require congressional approval, allowing for uninterrupted disbursement. The department noted that over 9.9 million students benefit from these programs across approximately 5,400 institutions.

The Free Application for Federal Student Aid (FAFSA) opened on September 24 for the 2026-27 academic year, ahead of the traditional October 1 start date. According to NerdWallet lending expert Kate Wood, students should not expect delays in the FAFSA process unless the Education Department issues further guidance. This early opening is a strategic move to ensure that students can secure financial aid without disruption.

Potential Hurdles for Borrowers and Students

While current students may not face immediate disruptions in their financial aid, those in the application process or seeking assistance may encounter delays. The American Council on Education (ACE) warned that borrowers seeking help from the Education Department could experience significant wait times, particularly if the shutdown extends. Additionally, applications for loan forgiveness, such as those under the Public Service Loan Forgiveness program, may also be affected.

This program is designed to assist public service workers, including teachers and police officers, in discharging their federal student loans after a decade of service in government or non-profit roles. The Education Department also administers income-driven repayment plans that offer forgiveness after 20 to 25 years of repayment, further emphasizing the importance of timely assistance for borrowers.

Continued Support for Vulnerable Populations

The Education Department has assured that funding for Title I and Individuals with Disabilities Education Act (IDEA) grants will remain available during a shutdown. These grants are crucial for low-income schools and students with disabilities, respectively. Similarly, most benefits under the GI Bill for veterans are expected to continue without interruption, as these programs are also funded through mandatory spending.

However, the ACE cautioned that prolonged shutdowns could lead to delays for veterans seeking additional verification or corrections to their claims. Historical precedents indicate that previous government shutdowns have resulted in backlogs and slowdowns in claims processing, which could exacerbate challenges for ex-military students.

New Grants and Civil Rights Investigations Halted

While existing grants will continue to be accessible, the Education Department has indicated that new grant awards will be suspended during a government shutdown. Fortunately, most grants are typically awarded over the summer, meaning that only a limited number of recipients may be affected. The department reassured that grantees would still be able to draw down funds from existing awards, minimizing the impact on schools and students.

Additionally, the Office for Civil Rights will pause its review and investigations of civil rights complaints during a shutdown. This suspension raises concerns about the enforcement of civil rights protections in educational settings, particularly for marginalized groups who rely on these protections.

Conclusion

As the possibility of a government shutdown approaches, the implications for student loans and federal education programs are significant. While borrowers are required to continue their repayments, the potential for reduced support and assistance raises concerns about the overall stability of the student loan system. The Education Department’s commitment to maintaining essential federal aid programs offers some reassurance, but the challenges faced by borrowers and students in navigating this uncertain landscape cannot be overlooked. As the situation develops, stakeholders will be closely monitoring the impact of a shutdown on education and student financial aid.