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A government shutdown in 12 days could make student-loan borrowers' repayment and customer service struggles even worse

Ayelet Sheffey   

A government shutdown in 12 days could make student-loan borrowers' repayment and customer service struggles even worse
  • A potential government shutdown is looming after November 17.
  • Congress has yet to put forth a solution to keep the government funded past that date.

A government shutdown is once again looming, and it's threatening an already precarious return to repayment for student-loan borrowers.

The government is set to run out of funding on November 17, and it's up to lawmakers to find a solution enough people can agree on to keep Washington running. Speaker of the House Mike Johnson has yet to put a continuing resolution on the floor to avert a shutdown, but Johnson previously told reporters he might be considering a "laddered" approach in which he would set staggered deadlines to pass the 12 individual spending bills.

It's unclear if he will formally propose that route, but Democratic lawmakers are not on board.

"I think the speaker doesn't have a clue," Democratic Rep. Rosa DeLauro told reporters. "That's 12 shutdowns. What are we talking about?"

Shutdown implications could be severe for all Americans. Thousands of federal workers would be furloughed, meaning Americans could face delays with customer service in programs like Social Security, along with student-loan repayment assistance.

Even before federal student-loan payments officially resumed in October, borrowers were experiencing severe delays getting help from their student-loan servicers due to hours-long hold times and issues processing paperwork. And if the government runs out of funding, those issues could worsen.

Every federal agency is required to submit a contingency plan to the Office of Management and Budget that outlines how it would structure its operations in the event of a government shutdown. According to the Education Department's 2023 plan, the department would furlough more than 89% of its total staff for the first week of a funding lapse, and it said that the lapse "could fall at a critical point in the administration of the large student aid programs."

The department noted that some operations, like FAFSA processing and servicing federal loans could continue for "a limited time," but they could also "experience some level of disruption due to a lapse."

This would likely make a bad situation worse. The Education Department recently released a memo highlighting a range of errors it found as payments resumed, including student-loan company MOHELA failing to send on-time billing statements to over 2.5 million borrowers. Additionally, it found borrowers are spending an average of 58 minutes on hold with their servicer, and call lengths are about 70% longer than 2019 because borrowers have more questions.

Further limiting the number of customer service representatives available in the event of a shutdown would place a greater strain on borrowers. While the Education Department has strengthened its oversight over servicing by withholding $7 million in October pay from MOHELA for its mistakes, as Insider previously reported, Federal Student Aid still needs more money to make repayment go smoother for borrowers and servicers.

"You cut millions of dollars out of someone's budget, there will be consequences," Scott Buchanan, executive director of the Student Loan Servicing Alliance — a group that represents federal servicers — told Insider, said. "They either won't be able to add more reps that they wanted to do, have to cut staff time, you know, you're going to have to make cuts, and those cuts are going to impact borrowers."


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