Everett Anderson’s aspiration was to become a teacher, a goal he pursued d …
Student loan borrowers left in a lurch as Congress teases government shutdown.
With yet another potential federal government shutdown on the horizon, the constant political gridlock in Congress may leave Americans feeling desensitized to the situation.
A faction of House Republicans, leaning rightward, is objecting to Speaker Mike Johnson’s initial agreement to avoid a shutdown. They view the risk of a shutdown as a bargaining chip to push for spending cuts. While the funding deadlock might seem distant from most people’s daily lives, it puts various expenses at risk, including Social Security benefits and travel expenses.
This time, the potential impact on student loans is particularly concerning.
Whenever a shutdown looms, critical aspects of the student loan system, such as Education Department staffing, become uncertain. The department’s funding is set to expire on Feb. 2, while other federal agencies could face funding cuts in less than nine days.
While federal direct student loans continue to be disbursed during a shutdown, borrowers’ ability to receive assistance from the Education Department diminishes as shutdowns extend beyond a week. In recent budget negotiations, student loans have gained even more relevance as House Republicans attempt to cut billions of dollars from the department’s funds.
“Borrower communications and call center support would be greatly reduced and potentially eliminated, leaving students and parents without assistance when they have questions or issues related to their loans,” stated the White House in response to the House GOP’s appropriation bill, which has been put on hold as Congress postpones discussion on a long-term budget.
This cycle is unlikely to break. Senate Majority Leader Mitch McConnell, R-Ky., stated on Tuesday that Congress “obviously” needs to pass another temporary spending measure, effectively deferring negotiations.
House GOP’s Target: Education Department Funding
In October, House Republicans introduced a yearly funding bill encompassing several federal agencies, including the Education Department. The proposed legislation includes a $265 million reduction in student aid administration.
President Joe Biden, who ultimately needs to approve congressional funding measures, opposed these reductions. The White House described them as “a devastating blow to borrowers and the supports they need to successfully navigate repayment.”
Some of the strongest opponents of student loan forgiveness and Biden’s efforts to provide debt relief to more Americans are members of the House GOP. In December, the chamber passed a partisan measure denouncing Biden’s income-driven student loan repayment plan known as Saving on a Valuable Education, or SAVE.
“America’s student loan system is broken, and this reckless, inflationary, and illegal expansion of executive authority will all but ensure it’s doomed beyond repair,” said Rep. Virginia Foxx, a North Carolina Republican and chairwoman of the House education committee, in a statement issued in December.
Implications for the Federal Student Loan System during a Government Shutdown
During a government shutdown, similar to other federal agencies, the Education Department significantly reduces its staff. In the first week of a shutdown, the agency would furlough over 89% of its employees, according to a contingency plan released in September. The plan was formulated before former House Speaker Kevin McCarthy was ousted in October.
As an essential service, the federal direct student loan system continues to operate during a shutdown. However, complications arise over time. And in a divided Congress like the current one, the possibility of a shutdown lasting more than a week is never completely off the table.
“A lapse in appropriations could occur at a critical point in the administration of the large student aid programs,” the contingency plan states.
Without its usual federal funding, the agency would have to deploy only a minimum number of employees to keep the federal direct loan system functioning. In September, White House Press Secretary Karine Jean-Pierre warned that such disruptions could have disastrous consequences.
“A prolonged shutdown lasting more than a few weeks could significantly disrupt the return to repayment effort and long-term servicing support for borrowers,” she stated at the time.