So, it looks like the federal government is shutting down due to Congressional gridlock. I’ll save the political commentary for another time—I know you all are wondering how this will impact your federal student loans.
I’ve contacted the U.S. Department of Education directly, and I’ve also spoken with members of the advocacy community who have contacts in the federal government. My understanding is that there should NOT be an immediate measurable impact on federal loan servicing. The Dept. of Education will not be shutting down completely, and day-to-day operations and loan servicing should continue largely uninterrupted.
However, if the shutdown extends beyond a week or two, we will likely begin to see major delays, disruptions, and snags, including with:
- Repayment plan changes
- Income-Based Repayment (IBR) payment calculations and recalculations
- Settlement decisions
- Complain resolutions
It is unclear how third-party agencies will be impacted, including loan servicing companies (such as Sallie Mae, AES, and Great Lakes) or federally contracted debt collection agencies. If the shutdown continues, employees will be furloughed, which will lead to longer wait times for customer service and significant processing delays across the board.
If the shutdown continues into November or beyond, it is very possible that we will see a major disruption of federal student loan disbursements to colleges and universities, which could severely impact current students.
The bottom line is this: right now, things should continue more or less as normal. The longer the shutdown lasts, the more severe the impact will be. I will endeavor to keep all of you posted on developments. In the meantime, you can read up on the projected impacts of the shutdown on higher education here and here.