That’s what a government shutdown on your student loans means.
Here is what you need to know.
The federal government could shut down this week if Congress fails to come to an agreement to fund the government. It comes at a time when the US Department of Education recently announced that $ 2 billion in student loans will be canceled in a matter of weeks. As such, you might be wondering how a government shutdown could affect your student loans, your student loan cancellation, and your student loan cancellation. Democrats in Congress want to pass a continuing resolution to fund government at its current level, while Republicans are threatening to shut down government on vaccine mandates proposed by the Biden administration. With federal government funding running out on Friday night, Democrats are positioning themselves for a two-month extension, while Republicans want a longer-term funding solution. While a government shutdown can be short-lived, it’s important to understand what a longer shutdown could mean for your student loans.
What is a government shutdown?
The federal government can temporarily shut down if Congress does not fund the government. To avoid a federal government shutdown, Congress must pass legislation to fund the federal government each year by October 1, which marks the start of the next fiscal year. If Congress does not fund the government beyond October 1, there could be a temporary shutdown of the federal government. If Congress cannot agree on funding for the next fiscal year, Congress may adopt one or more short-term funding solutions to keep the federal government open. Democrats and Republicans will have to agree on a funding fix to avoid a government shutdown this weekend, whether it’s another short-term funding plan or an appropriation bill most important. If there is a shutdown, some federal services and agencies may be temporarily limited. That said, each federal agency is developing its own closure plan. Essential services such as law enforcement, border protection and public hospitals, for example, continued to function during previous closures. (Here’s who qualifies for the student loan waiver right now).
How a government shutdown affects student loans
If there is a short-term government shutdown, expect little impact on your student loans. Specifically, a government shutdown only affects the federal government. There is no impact on private student loans, for example, and state and local governments will continue to operate. Currently, for your federal student loans, there is a temporary student loan forbearance until January 31, 2022. (Prepare for the end of student loan relief). This means that there are no mandatory payments for federal student loans and the interest rates on federal student loans are temporarily set at 0%. Even with a longer-term government shutdown, you should still be able to:
The question is whether Processing these various requests could be delayed during the shutdown of the federal government. (Here’s who qualifies for the student loan waiver right now). The good news is, you can contact your student loan manager, which is a private company that works with the federal government to manage your student loans, but is not part of the federal government.
Will student loan relief expire or be extended?
Temporary student loan forbearance due to the Covid-19 pandemic will have provided student loan borrowers with 22 months of student loan relief. (How to get an automatic student loan forgiveness). This student loan relief, in total, will give student loan borrowers $ 110 billion in student loan cancellations. (Here’s how to get a student loan discount during the Biden administration). The Biden administration has extended student loan relief twice: once in January 2021 for 8 months, then another four months until January 31, 2022. If there is a prolonged government shutdown, it is possible that this date for restarting student loan payments be extended. Why? The US Department of Education has the onerous task of contacting student loan borrowers to make sure they are ready to restart federal student loan payments as of February 1, 2022. (Here’s how loan repayments will work. students when student loan relief ends). The Education Department is also moving around 16 million student loan borrowers to a new student loan facility next year. If the government remains closed for an extended period, these efforts could be delayed, and this could possibly delay the restart of federal loan payments. Having said that, this is a low probability.
Student loans: next steps
Most likely, Congress will come to a short-term funding deal to keep the federal government operational, or there will be a short-term shutdown of the federal government. The important thing to remember is that your student loan payments are always due, regardless of a government shutdown. Private loans are not affected by a government shutdown. Although federal loans are temporarily on hold, you will still owe federal student loans as of February 1 if there is no extension. The best thing you can do for your student loans now is to know your repayment options. With the end of temporary student loan relief, it’s more important than ever to be cautious about your student loans. Here are some smart ways to pay off your student loans faster: