Student Loan Payments to Resume Despite Government Shutdown Threat
Student loan borrowers in the United States are facing the resumption of loan payments starting in October, even with the looming threat of a government shutdown if Congress fails to pass a funding plan by September 30. Despite ongoing concerns and questions online, both the U.S. Department of Education and the White House have confirmed that student loan payments will restart, and interest will continue to accrue, regardless of a potential government shutdown.
During a recent press briefing, White House press secretary Karine Jean-Pierre assured reporters that key activities at Federal Student Aid will continue for a couple of weeks in the event of a government shutdown. However, it is important to note that there may be delays for those seeking help or guidance from the Education Department due to potential furloughs. Students applying for federal aid during a shutdown may also encounter delays in the processing of their applications.
Officials have expressed concerns about potential disruptions to various processes, such as processing FAFSA applications, disbursing Pell Grants, and pursuing public loan forgiveness. As of now, the Education Department has not released specific details on how it will operate if a government shutdown occurs.
In August, the Biden administration introduced the Saving on a Valuable Education (SAVE) plan as an updated version of the Revised Pay As You Earn Repayment Plan. The SAVE plan aims to reduce borrowers’ monthly payments by 50% and allows many borrowers to make $0 monthly payments while also preventing their balances from growing due to unpaid interest.
To provide relief for individuals who may not be able to make immediate payments when loan repayment resumes in October, the Education Department has created a temporary on-ramp transition period. During this period, payments will still be due, and interest will continue to accrue. However, borrowers who fail to pay will not be reported as delinquent to credit reporting agencies. This on-ramp transition period will be in effect from October 1, 2023, to September 30, 2024.
It is crucial for borrowers to understand that while delinquencies may not be reported during the on-ramp period, failing to make payments could still have adverse effects on their credit. Betsy Mayotte, president of The Institute of Student Loan Advisors (TISLA), emphasized the importance of borrowers being aware of this potential impact.
As of now, the U.S. Department of Education and the U.S. Office of Management and Budget have not provided further information regarding the government shutdown and its specific implications for student loan borrowers.
In conclusion, despite the possibility of a government shutdown, student loan payments are set to resume in October in the United States. Borrowers should prepare for the restart of loan payments and be aware of the potential impact on their credit if payments are not made. The Education Department is expected to provide additional guidance on its operations during a shutdown if one occurs. It is recommended that borrowers stay informed and seek assistance from relevant organizations to navigate the resumption of student loan repayments effectively.
