Even though the U.S. government is in a shutdown, federal student loan borrowers still need to make their monthly payments. Despite widespread disruptions across federal agencies, the Department of Education confirmed in a late September memo that student loan repayments are not on hold, even with many department staff on furlough.
Loan Servicing Continues
While many operations within the Education Department are impacted, most services related to federal student loans remain active. This is primarily because third-party servicers handle these tasks, and they continue to operate during the shutdown.
Industry experts confirm that borrowers can still perform most essential actions, such as applying for new repayment plans, requesting current billing statements, and reaching out to customer service. Companies like Nelnet and CRI continue to manage student loans on behalf of the government. If you’re unsure who your loan servicer is, you can find this information on Studentaid.gov.
Forgiveness Applications: Accepted, but Not Processed
You can still submit applications for federal loan forgiveness programs, including Public Service Loan Forgiveness and Total and Permanent Disability Discharge. However, actual approvals are currently on hold. These discharges require approval from the Department of Education, and with most staff furloughed, the processing of these applications is stalled. Some forgiveness notifications have still been sent out, but ongoing legal challenges have caused additional delays. A lawsuit related to student loan forgiveness has also been paused due to the shutdown.
Potential Tax Implications from Delayed Forgiveness
Delays in loan forgiveness could have future financial consequences for some borrowers. Under the American Rescue Plan Act of 2021, student loan forgiveness is federally tax-free until the end of 2025. However, this benefit was not made permanent. If your loan discharge is processed after this exemption expires, you might face an IRS tax bill. Reports indicate that some borrowers were already experiencing forgiveness processing delays even before the shutdown began.
Don’t Panic: Most Services Are Still Available
Student loan advisors urge borrowers not to panic, emphasizing that most actions related to federal student loans are still accessible. Just be aware that any approvals for debt cancellation will only resume once the Department of Education is fully operational again.