What does the government shutdown mean for your student loans?

By Kaydee Ambas, CFEI® | Published on October 21, 2025

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TL;DR

• Payments continue: You still need to make student loan payments during a government shutdown.
• Forgiveness & PSLF: Applications may face delays while Department of Education staff are furloughed.
• Consolidation & discharge: Processing could be slowed or paused.
• FAFSA & aid: FAFSA remains open, and Pell Grants/Direct Loans are still funded—but verification steps may be delayed.
• Borrower tip: Stay current on payments, apply early for forgiveness or consolidation, and watch for servicer updates.

The U.S. government officially shut down after lawmakers missed the Sept. 30 funding deadline. Negotiations in Congress broke down, and as a result, many federal agencies have been forced to scale back or pause operations.

For student loan borrowers, this comes at a time when student loans are already in the spotlight. Recent legislation—from the introduction of RAP, to new FAFSA® rules taking effect in 2026, to the upcoming end of Grad PLUS loans. A shutdown adds one more layer of uncertainty.

The key takeaway: your student loan servicing continues during a shutdown, but some programs may face delays. Here’s what to expect and how to stay prepared.

What is a government shutdown?

A shutdown occurs when Congress fails to pass new funding bills—or a temporary stopgap known as a “continuing resolution”—before the current budget authority expires. Without that legal authority to spend, many federal agencies must furlough workers and pause operations until Congress and the White House reach an agreement.

• Essential services like military operations, air traffic control, and Social Security continue, though sometimes with limited staff.
• Non-essential services—everything from national parks to some education programs—may close or slow dramatically.

That distinction matters for student loans. Loan servicers can keep running, but programs that require Department of Education staff oversight could face delays.

How a shutdown affects student loan borrowers

Loan payments continue

• Payments are still due. Loan servicers remain open and continue processing payments.
• You’ll still be able to log in, check your balance, and manage repayment options.

Loan forgiveness & PSLF may be delayed

While broad, one-time cancellation programs have been struck down, t here are still forgiveness and discharge options available for qualified federal borrowers.

• Public Service Loan Forgiveness (PSLF): Applications and approvals may slow if Department of Education staff are furloughed.
• Other forgiveness and discharge programs—like Teacher Loan Forgiveness, Borrower Defense to Repayment, Closed School Discharge, and Total & Permanent Disability (TPD) Discharge—also rely on DOE/FSA staff and may face processing delays.

Consolidation & discharge processing could slow

• New consolidation or discharge applications may not move forward until normal staffing resumes.

FAFSA & federal aid

• FAFSA is open: The 2026-27 FAFSA is officially open, and students can begin submitting applications now. Everyone who’s going to school should fill it out. It’s important to fill it out as soon as possible because the free money—grants and scholarships—is first-come, first-served.
• Applications will still be accepted during a shutdown. The online FAFSA form remains available because it’s considered an essential function.
• But processing may slow: Certain steps in the FAFSA process require coordination with other federal agencies, such as:
  • IRS Data Retrieval / Direct Data Exchange (DDX): If IRS staff are furloughed, pulling tax info for verification could take longer.
  • Verification checks: Students flagged for additional income or identity verification may face processing delays.
• Aid funding is still available: Pell Grants and Direct Loans are supported in part by mandatory or permanently authorized funding—meaning that even if discretionary appropriations lapse, these programs have legal backing beyond the annual budget process.

Tip for families: Submit the FAFSA early to secure your place in line. Even if processing is delayed, your application date can affect eligibility for state and institutional aid.

Department of Education workforce already slashed in 2025

Even before the shutdown threat, borrowers were already bracing for slower service. In March 2025, the Department of Education initiated a reduction in force (RIF) that cut nearly 50% of its workforce. That meant fewer staff available to process forgiveness applications, handle borrower defense claims, or manage FAFSA support.

Now, the shutdown has compounded the problem. The DOE confirmed it will furlough about 87% of those employees, so roughly 2,117 people. That means from March to October, the DOE went from over 4,000 employees to just about 330 staff members—a staggering drop that helps explain why borrowers are now seeing even longer delays.

While Pell Grants, Direct Loans, FAFSA processing, and loan servicing have some protection through mandatory or advance funding, the plan itself warns these activities could still face “some level of disruption.”

For borrowers, that double hit—a permanently reduced staff plus widespread furloughs—means delays are more likely than in past shutdowns. Processes that already felt slow (like forgiveness approvals or FAFSA verifications) may take even longer this time around.

FAQs borrowers are asking

Do I still have to make student loan payments during a shutdown?

Yes. Loan servicers remain operational, and payments are still required.

Will student loan forgiveness be delayed?

Possibly. Applications and approvals may pause until Department of Education staff return.

Can I still apply for consolidation or discharge?

Yes, but processing could take longer during a shutdown.

What happens to FAFSA?

You can still submit the FAFSA, but verification may be slower.

Does a shutdown cancel student debt?

No. Shutdowns do not erase or forgive existing student loans.

What borrowers should do now

• Stay current on payments. Unless you have approved deferment or forbearance, payments remain due.
• Apply early. If you’re considering forgiveness, consolidation, or discharge, submit paperwork as soon as possible to avoid backlogs.
• Watch for updates. Your loan servicer is the best source for account-specific changes.
• Review repayment options. This is a good moment to check if your current plan still fits your budget. If you’re looking to simplify repayment or lower your interest rate, refinancing with Earnest could be a smart option.

Tip for borrowers: Only 1 in 10 borrowers who could save money by refinancing actually do. Reviewing your repayment options now could put you in that 1—with lower monthly payments or a shorter path to becoming debt-free.

How Earnest can help

If you are an Earnest client and experiencing financial hardship as a result of the government shutdown, please reach out to our Client Happiness Team. We’ll work with you to understand your options and provide support where we can.

A government shutdown may cause delays in certain student loan processes, but your core loan servicing continues. By staying proactive and informed, you can keep your repayment on track—and if you’re an Earnest borrower, know that our team is here to help you navigate challenges with care.

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About the Author

Kaydee Ambas, CFEI®

Kaydee Ambas is a Certified Financial Education Instructor℠ and the Content Marketing Manager at Earnest, where she leads content strategy that empowers borrowers to make confident, informed decisions about student loans. With work published by outlets like MSN, Yahoo! Finance, and SoFi, she brings a deep commitment to educational, empathetic content. When she's not writing, you'll likely find her painting in Golden Gate Park.

Disclaimer

This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

1This claim is based on analysis combining publicly available data and proprietary underwriting models. We applied our proprietary data and underwriting criteria to estimate the portion of borrowers who are credit-eligible and could achieve savings through refinancing. Actual savings and eligibility may vary based on individual circumstances, creditworthiness, and current loan terms. This analysis reflects market conditions as of 2025 and is subject to change.