If Congress does not pass a spending bill by October 1, the federal government will shut down. Based on previous federal shutdowns and on guidance issued from Federal Student Aid in an April 2011 Dear Colleague Letter, a short-term shutdown would appear to have minimal impact on student aid processing and funding. Because most of the Federal Student Aid programs are forward funded (i.e., funding for the current award year primarily comes from last year’s budget), most of the funding is already in place for the 2013-14 award year. The 2011 DCL advised:
"In the event of a closure of the federal government (more commonly referred to as a shutdown or furlough), there will be minimal impact on schools, lenders and guaranty agencies and their ability to administer the Title IV Programs. While our federal offices would be closed during a federal government closure, the majority of our Title IV processors, call centers, and Web sites will remain operational. In this announcement, we provide operational guidance about Federal Student Aid's communications, customer service call centers, scheduled system outages, processing systems, Web sites, and training workshops should a federal government shutdown occur."
While nothing is certain in such an unpredictable political environment, past precedent would indicate normal processing in the near future irrespective of a short-term federal shutdown. Should a shutdown become prolonged, it is possible that processing would be impacted, but at this stage it is difficult to speculate on the extent or manner of any impact. NASFAA has inquiries into ED asking for additional, up-to-date guidance.
The next hurdle of concern would be the failure of Congress to increase the debt ceiling; reports indicate the the U.S. Treasury Department is expected to run out of borrowing options in mid-October. Failure to increase the levels of debt which the U.S. can take on could potentially disrupt student aid funding, not to mention financial markets across the globe.
NASFAA will follow the issue closely and provide updates as warranted in Today’s News. Please send your questions to policy@NASFAA.org.
Publication Date: 9/25/2013