A government shutdown is a scenario that occurs when Congress does not pass a budget law for the coming fiscal year. During a government shutdown, ânon-essentialâ government offices are closed, which could impact programs like Social Security, SNAP and more. Government closures can also affect parts of student financial aid.
Key takeaways: how a government shutdown could affect your financial aid
- If you complete the FAFSA: Applications would still be accepted, but verification of eligible non-citizen status may be delayed. Copies of transcripts may be difficult to obtain.
- If you are applying for a new loan: The federal student loan application process could be slowed down, especially if you are looking for a direct consolidation loan outside of the FAFSA.
- If you are asking for a loan forgiveness. Loan officers would always be available to help with requests for student loan exemption programs. Government employees working on civil service loan forgiveness could defer payments while on leave, but deferral periods would not count towards the PSLF.
- If you have a grant: Students may not receive money for grant-funded programs until the government shutdown ends. Grants awarded by the FAFSA may be delayed.
What is a government shutdown?
Each year, Congress and the President must pass the funding votes to keep the government running. A government shutdown occurs if Congress does not pass a law or if the President does not sign the funding appropriations into law.
There are partial closings and full closures, depending on the number of bills passed by Congress. In December 2018, Congress passed five of the 12 bills required for government to function, resulting in only a partial shutdown. In the 2018-19 partial shutdown, 380,000 federal employees were put on leave and another 420,000 employees went to work but did not receive a salary.
Employees on leave are not allowed to work and do not receive a paycheck during the time they are not working, but they are guaranteed to return to work at the end of their leave. Earlier in 2018, there was a complete government shutdown, where 850,000 federal employees were put on leave.
How government shutdowns affect the FAFSA
During a government shutdown, you can still apply for the FAFSA and receive funding for the school year. But there are some limitations. For example, the Department of Homeland Security could delay verifying non-citizen status eligible for financial assistance.
Even though FAFSA requests are accepted and reviewed, there are other departments that might delay you. The IRS works with a limited number of employees during a shutdown, so if you need a tax transcript, your request may take longer than normal.
How Government Closures Affect Federal Financial Aid
If you are looking for college financial aid, a government shutdown could add time to the process. New FAFSA loans are generally reviewed and processed, but a government shutdown could slow things down. And the type of loan you are applying for is important. For example, a direct subsidized loan that is processed through a FAFSA application should be suitable. But if you are applying for a direct consolidation loan, which is a separate application, expect some delays.
A government shutdown also means some programs are in limbo until legislation is passed. Some students who work in grant-funded programs or receive school grants might not get their money until the government reboots. Even though you should get your FAFSA grants, including the Pell Grant, you may have to wait longer than normal.
The bottom line
While government shutdowns are not common, there have been a few over the past decade, including the most recent shutdown in 2018-19. Sometimes there isn’t much you can do, but there are ways to prepare your financial aid for a government shutdown.
For example, if you are completing a FAFSA, apply as soon as the application is available: every year on October 1. Also make sure that your tax documents or those of your parents are as up to date as possible. Since your application may take longer to process than usual during a government shutdown, you’ll want to take advantage of the opportunity to apply early. That way, in case you need to fill out other paperwork or submit additional forms, you’ve given yourself plenty of head start.