An imminent federal government shutdown could have catastrophic consequences for millions of student loan borrowers, advocates warned this week. A shutdown would directly impact Education Department operations, imperiling federal student loan forgiveness and repayment programs just as billing is resuming.
House Republicans have so far been unable to enact a federal spending package that would pass the Senate and could be signed by President Biden. A relatively small number of far-right lawmakers are demanding extreme spending cuts in exchange for keeping the government open — a nonstarter for Democrats and even some moderate Republicans. These GOP lawmakers balked at a stop-gap measure passed by the Senate this week, increasing the chances of a shutdown by this weekend.
Here’s the latest.
Student Loan Forgiveness And Repayment Programs Already Facing Problems
Even before the threat of a government shutdown, borrowers have been encountering significant hurdles trying to navigate student loan forgiveness and repayment programs as the student loan pause has ended.
Borrowers have been reporting extremely long call hold times when trying to reach their loan servicers, as well as processing errors and delays. Other borrowers have received misinformation about loan forgiveness or repayment plan eligibility, even as the Biden administration tries to expand access to key student debt relief programs.
Earlier this month, a federal watchdog agency warned student loan servicers that it is monitoring the situation, and could engage in enforcement actions against loan servicers that break the law.
Advocates Warn Government Shutdown Be Catastrophic For Student Loan Borrowers
Advocates are warning that a government shutdown could be devastating for borrowers, making an already tenuous situation catastrophic.
“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,” said Mike Pierce, executive director of the Student Borrower Protection Center, in a statement on Wednesday. “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.”
“To throw borrowers back into repayment with bad faith loan servicers and an under-staffed Department of Education is a recipe for disaster and would deeply undermine the progress we have made to advance economic justice for student loan borrowers,” said Rep. Ayanna Pressley (D-MA) in a statement on Wednesday. “The Republican government shutdown stands to harm families across the nation, many who were just regaining their financial footing for the first time since the Covid-19 crisis.”
Pressley and the SBPC called on President Biden to extend the student loan pause again if the government shuts down.
Government Shutdown Could Imperil Student Loan Forgiveness And Repayment Programs
While student loan servicers would continue to operate during a government shutdown, other federal student aid operations could grind to a halt, imperiling access to key federal student loan forgiveness and repayment programs.
The Education Department, which will face massive furloughs during a shutdown, would no longer be able to process and approve student loan forgiveness under a number of programs including Public Service Loan Forgiveness, the IDR Account Adjustment, the Total and Permanent Disability discharge program, and Borrower Defense to Repayment.
The department also likely wouldn’t be able to process and resolve disputes submitted by borrowers over actions by loan servicers, such as for miscalculating payments under income-driven repayment plans or supplying misinformation. This will leave borrowers without oversight or recourse during a critical period, as millions of borrowers will be billed for the first time in October after the three-year student loan pause has come to an end.
Further Student Loan Forgiveness Reading
8 Ways To Lower Your Student Loan Payments As Billing Resumes
Timeline For Biden’s New Student Loan Forgiveness Plan Gets Clearer
Student Loan Forgiveness Update: ‘Targeted’ Initiatives Continue, But Threats Loom
There’s Still Time To Qualify For Student Loan Forgiveness Under Adjustment
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