A government shutdown never arrives at a convenient time, but the possibility of an Oct. 1 closure could hardly come at a worse time. It just so happens to coincide with the resumption of federal student loan payments for some 44 million Americans after a three-and-a-half-year pause.
In September, federal student loans started accruing interest again, but the first actual due dates for payments begin in October. Experts were expecting borrowers to be confused, overwhelmed, and anxiety even without a government closure thrown in the mix.
Democrats have until March to pass budget legislation and avert a shutdown. Analysts and other experts do not count on that happening. Goldman Sachs' chief economist and head of global investment research, Jan Hatzius, wrote in a note on Wednesday.
If the government shut down, October 1 payments for student loans will still be due. Third-party companies that work with the federal government to manage loan maintenance and billing are called servicers. The U.S. Department of Education is paying those companies, and the funds are included in the budget legislation, but they may have enough money already to keep the processing running.
The duration of the shutdown will be influenced by the length of the shutdown.
A shutdown could present headaches in other ways, such as that there may be fewer workers at the Education Department to answer questions and help borrowers solve any problems that crop up, according to a contingency plan made by Education Secretary Miguel Cardona. The shutdown couldn't come at a worse time, as there are likely to be plenty of problems after a three-plus-year hiatus.
There could be confusion around the SAVE plan, a income-based repayment plan recently introduced by the Biden administration. Borrowers may also have concerns about the 'on-ramp' to repayment, a 12-month grace period that the administration instituted to help those who may struggle to pay their bills. Since the pandemic, there have been numerous changes to student loan repayments, terms, and servicing companies.
What is going on with student loan forgiveness? Although President Joe Biden's widespread forgiveness plan has been blocked by the Supreme Court, his administration has forgiven a slew of loans in other ways. Borrowers affected-or those who may erroneously believe their loans were forgiven- may encounter problems with their servicers having the right payment information or even understanding how much they owe now.
The shutdown could cause delays for those applying for federal aid, as the FAFSA application process could slow down. It could also slow down the process for loan forgiveness for those who qualify.
In other ways, there will be plenty of others impacted by the shut down. Many federal workers could be furloughed while others work without pay, leading to a significant number of workers being furloughed. Even before the first payments are officially due, borrowers have started repaying billions of dollars of student loan debt. Studentaid.gov or contact the studentaid.gov number to get assistance in figuring out what payment plan is right for them or how much they owe.