The Department of Education, Student Loans, and Government Shutdowns: What You Need to Know

The intersection of the Department of Education (ED), student loans, and government shutdowns can create uncertainty for borrowers, schools, and lenders. This article aims to provide clarity on how these factors interact, particularly in light of the recent government shutdown on October 1, 2025, and the ongoing student loan forgiveness programs.

Minimal Impact on Core Title IV Program Operations

Despite the government shutdown, the Department of Education has stated that there is minimal impact on the core operations of Title IV programs. This means that students, borrowers, schools, lenders, and guaranty agencies can generally continue to participate in these programs. Users can still log in to StudentAid.gov to access their accounts and information.

All core operations at the federal loan servicers-MOHELA, Nelnet, Aidvantage, CRI, Edfinancial, and ECSI, as well as the Default Resolution Group-are continuing. These operations include:

Contact center operations
Billing
Receipt of payments
Deferment and forbearance processing

Borrowers are still expected to make payments on their federal student loans during the shutdown.

Potential Delays and Impacts

While many operations continue, some areas may experience delays or disruptions:

Read also: The CPB Logo: A Visual History

Office of Consumer Education and Ombudsman: This office is unable to respond to requests during the shutdown, which may delay the resolution of pending and new cases.
Challenges, Adjustments, and Appeals: These will be accepted but not processed until the federal government reopens. All deadline dates will be evaluated on a case-by-case basis for any users experiencing technical issues.
FAFSA Processing: Students and their contributors can continue to start, fill out, and submit a FAFSA form at fafsa.gov. The FAFSA Partner Portal remains available to schools.
G5 System: The G5 system was scheduled to shut down at 8 p.m. Eastern time (ET) on Wednesday, Oct. 1, 2025, while ED finalizes its processing and accounting for Fiscal Year 2025.
Student Aid Internet Gateway (SAIG): The TDCM Web Portal and the FTI-TDCM Web Portal are operational. Schools can continue to submit eligibility actions using FSA Partner Connect. All applications submitted during the closure will be addressed after the government reopens.
HCM2 Reimbursement Claims: All schools currently on HCM2 may submit a reimbursement claim during the lapse in appropriations.
FFEL Program Lenders and Guaranty Agencies: These entities will continue their operations during the shutdown.
ED Form 799/LaRS and Form 2000: FSA will not process these forms because of scheduled year-end closing activities.
FSA Staff: FSA staff cannot attend national, state, or regional conferences during the lapse in appropriations.

NSLDS and Reporting Deadlines

The National Student Loan Data System (NSLDS) Professional Access is available to all authorized users. NSLDS users can request and receive both automated and on-demand reports.

Important deadlines to note:

October 1, 2025: Deadline for reporting data to NSLDS for the Financial Value Transparency and Gainful Employment (FVT/GE) 2025 cycle.
September 30, 2025: Extended deadline for the 2024 cycle for reporting and the evaluation of the Completers List.

The draft Completers List for the 2025 cycle will be generated after the federal government reopens. Institutions will have at least 60 days to make any corrections to their data in NSLDS following receipt of the list. If you are experiencing issues accessing NSLDS, you may report FVT/GE data after the published deadline.

Student Loan Forgiveness and the Shutdown

Student loan forgiveness has restarted for a small number of Americans enrolled in Income-Based Repayment (IBR) plans. The Education Department (ED) temporarily suspended forgiveness in July to update its systems to accurately account for qualifying monthly payments.

IBR Plan Forgiveness

The IBR plan cancels outstanding loan debt for borrowers after they’ve made 240 or 300 monthly payments - or about 20 to 25 years of payments, depending on the age of the loan. Updates are being completed, and eligible borrowers will have their loans forgiven over the next several months unless they opt out. Borrowers who want to decline forgiveness should contact their loan servicer. ED will forward discharge information to loan servicers after Oct. 21, and loan servicers would then process the discharge.

Eligibility for IBR Forgiveness

To be eligible for student debt forgiveness under the IBR plan, borrowers must have made the required number of monthly payments:

Loans taken before July 1, 2014: 300 payments (25 years)
Loans taken after July 1, 2014: 240 payments (20 years)

IBR is one of four Income-Driven Repayment (IDR) plans that consider income to determine the monthly payment amount. The other three IDR plans are Pay As You Earn (PAYE), Income Contingent Repayment (ICR), and Savings on a Valuable Education (SAVE). Payments on the other three plans are only counted toward forgiveness if the borrower enrolls in IBR.

Impact of the Shutdown on Forgiveness

The government shutdown has already suspended the American Federation of Teachers’ (AFT) class-action lawsuit accusing the Trump administration of slow-walking student loan forgiveness. Department of Justice attorneys aren’t allowed to work on the case during the shutdown, but the AFT is pushing for proceedings to resume as soon as possible to prevent delays that could affect borrowers' taxes.

The American Rescue Plan Act of 2021 exempted student loan forgiveness from federal taxes until the end of 2025.

"It really is urgent for those borrowers who are already entitled to have their loans canceled to make sure that cancellation does get processed before the end of the year," said Persis Yu, Deputy Executive Director and Managing Counsel at the Student Borrower Protection Center. "Otherwise, they could face thousands of extra dollars in tax liability."

If student debt forgiveness is pushed into 2026, federal taxes apply again, as well as any state taxes. Some borrowers may consider opting out of the discharge to avoid potential tax liability, but they would then be required to continue repaying their loans.

Number of Americans Receiving Forgiveness

A firm number is hard to gauge, but it’s likely small. About 2 million Americans are enrolled in IBR plans, and only a subset of borrowers is eligible.

Department of Education: A Critical Examination

The Department of Education's role in managing student loans and overseeing education policy has been a subject of debate. Established in 1979, the Department has been criticized for its bureaucratic structure and perceived lack of effectiveness in improving educational outcomes.

Arguments for Reforming the Department of Education

Critics argue that the Department of Education has failed to deliver on its promise of improving American education. They point to stagnant or declining reading and math scores as evidence of this failure. Some propose closing the Department and returning its main functions to the states, arguing that this would allow for more localized and responsive education policies.

One of the key concerns is the Department's management of the federal student aid program. With a student loan debt portfolio exceeding $1.6 trillion, the Department's Office of Federal Student Aid has a significant responsibility. However, with fewer than 1,500 employees, some argue that it lacks the capacity to effectively manage this complex portfolio.

Arguments for Maintaining the Department of Education

Supporters of the Department of Education argue that it plays a crucial role in ensuring equal access to education and promoting innovation in schools. They point to the Department's efforts to support disadvantaged students, promote STEM education, and encourage the adoption of evidence-based practices.

The Department also plays a critical role in collecting and analyzing data on education trends, which can inform policy decisions at the federal, state, and local levels. Its research and development programs have contributed to advancements in educational technology and teaching methods.

Federal Funds and Compliance

It's important to note that the Secretary of Education is responsible for ensuring that the allocation of any Federal Department of Education funds is subject to rigorous compliance with Federal law and Administration policy. This includes the requirement that any program or activity receiving Federal assistance terminate illegal discrimination obscured under the label “diversity, equity, and inclusion” or similar terms and programs promoting gender ideology.

Navigating Financial Uncertainty During a Shutdown

A government shutdown can create financial uncertainty for many individuals and families. Here are some steps you can take to manage your finances during this time:

Prioritize essential expenses: If your income is disrupted (e.g., due to a furlough), prioritize essential expenses such as housing, food, and healthcare.
Contact creditors early: If you anticipate difficulty making payments, contact your creditors early to discuss flexible payment options.
Compare healthcare plans: If subsidies for health insurance premiums for Affordable Care Act (ACA) enrollees expire, compare healthcare plans carefully during open enrollment.
Cut back on spending: Be proactive about cutting back on your spending to prepare for potential income interruptions or higher healthcare costs.

Other Financial Considerations

Banking Services: Banks are not affected by government shutdowns. Deposits, ATMs, and online banking services will continue to operate as usual. Citizens and other FDIC-insured banks are not tied to the federal funding process and remain fully operational.
Mortgages: Federal loan programs, including those from the Federal Housing Administration (FHA) and Department of Veteran Affairs (VA), may be delayed. Buyers and sellers should stay in close contact with their mortgage advisors.
Credit Cards: Credit card services will stay active during the shutdown. If an income interruption affects your ability to pay your balance, contact your credit card provider to discuss flexible payment options.

tags: #department #of #education #shutdown #student #loans