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Key student-loan relief is on the line as Congress once again works to avoid a government shutdown

Ayelet Sheffey   

Key student-loan relief is on the line as Congress once again works to avoid a government shutdown
  • Congress is back to negotiating spending bills as a government shutdown looms.
  • Funding for the labor and education bill will lapse on February 2 without an agreement on new spending.

The government is once again facing the threat of a shutdown if Congress doesn't act soon — and key programs for student-loan borrowers are set to be a part of spending negotiations.

In November, Congress voted to pass Speaker of the House Mike Johnson's "laddered" government funding bill that extended funding for four spending bills through January 19, and the remaining eight bills through February 2.

That means lawmakers are once again facing a time crunch to agree on a solution that would prevent a government shutdown early this year. They'll need to negotiate the contents of the remaining spending bills in order to do so. On Sunday, congressional leaders said they'd agreed on reaching a total of $1.66 trillion in spending.

The House education committee's bill — the Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act — is among the funding that will expire in February. As the text of the bill stands, a range of key resources for student-loan borrowers are at stake.

Specifically, the GOP's proposal would cut funding for the Federal Student Aid office, which oversees student-loan repayment and servicing, by $265 million below its current level and $884 million below Biden's budget request to Congress.

And the bill's provisions would target the Education Department's recent initiatives to get relief to borrowers. For example, the bill would seek to prohibit funding for streamlining the borrower defense to repayment plan. That program is a route for borrowers who believe they were defrauded by their school to apply for loan forgiveness.

The bill also stated it would not boost funding for the new SAVE income-driven repayment plan, which the department implemented over the summer to lower monthly payments for borrowers.

"This bill includes strong measures offered by Republicans that will rein in America's debt, and the Committee is confident in its trajectory," a House education committee spokesperson told Business Insider.

Biden's administration has been firm in its opposition to the Republican lawmakers' proposals. The Office of Management and Budget released a statement in November saying that the proposed budget cuts "would deal a devastating blow to borrowers and the supports they need to successfully navigate repayment."

"Borrower communications and call center support would be severely curtailed and possibly eliminated, leaving students and parents without help when they have questions or issues related to their loans," the OMB said.

Negotiations on the bill come at a critical time for student-loan borrowers. In October, federal payments resumed for the first time after an over three-year pause, and borrowers have encountered a host of challenges as they navigate the transition, including hourslong hold time with customer service and inaccurate — or late — billing statements.

Even as funding for Federal Student Aid is uncertain right now, the Education Department has said it will continue to enforce oversight over servicers to ensure they are fulfilling their obligations to borrowers, including withholding the servicers' pay, if necessary.