The Department of Education, alongside other agencies, is preparing for a possible government shutdown as Democrats and Republicans remain deadlocked over the 2026 federal budget.

Democrats want to extend Affordable Care Act subsidies, while Republicans aim to block undocumented immigrants from receiving federal health benefits and require 80 hours of work or volunteer service per month to qualify.

The deadline to avoid a shutdown is midnight on Oct. 1. Without a deal, "non-essential" government functions will close or cut staffing starting at 12:01 a.m.

The department plans to furlough approximately 95% of its non-Federal Student Aid staff for the first week of a shutdown. The department also plans to furlough approximately 85% of the staff in the Office of Federal Student Aid, leaving 115 employees to perform the office's essential work.

The shutdown threat comes after President Donald Trump's administration cut roughly half of the department’s workforce in March, and millions of borrowers’ credit scores plunged after falling behind on payments.

More problems will arise the longer Washington delays a deal, according to Persis Yu, Deputy Executive Director and Managing Counsel at the Student Borrower Protection Center.

"This moment is actually really important in the student loan cycle because we are on the cusp of millions of borrowers defaulting on their student loans," Yu said. "Borrowers need service right now more than ever."

What is not likely to change

A shutdown won’t excuse borrowers from making progress on their loans, as they will still need to make payments on their outstanding student debt.

The department will continue to disburse Pell Grants and Federal Direct Student loans, according to the department’s contingency plan.

As available, permanent and multi-year appropriations will also be used to continue processing Free Applications for Federal Student Aid, or FAFSA, the plan said.

Borrowers should still be able to reach their loan servicers and vendors to ask questions during a short shutdown, said Betsy Mayotte, the President and Founder of The Institute of Student Loan Advisors.

"The only time it becomes questionable is if the shutdown were to last a very long time — weeks or months," Mayotte said.

Private student loan lenders and servicers that operate independently generally should not be affected by the shutdown.

What could change

During a lapse in funding, the department would cease any new grantmaking activities. However, the plan said most of the department's grant programs "typically make awards over the summer and therefore there would be limited impact."

Debt relief programs and initiatives may also be affected if staff cannot process applications. On Sept. 16, the American Federation of Teachers, or AFT, filed a preliminary injunction in its lawsuit against the department, alleging it stopped statutorily required loan cancellation and processing of Public Service Loan Forgiveness.

"It really is urgent for those borrowers who are already entitled to have their loans canceled to make sure that cancellation does get processed before the end of the year," Yu said. "Otherwise, they could face thousands of extra dollars in tax liability."

AFT President Randi Weingarten said a shutdown would make "an already interminable situation" much worse.

"A shutdown will mean even less oversight of loan servicers, end any help for borrowers when things go wrong and exacerbate an already broken and understaffed system," Weingarten said in a statement to USA TODAY. "The over 1 million borrowers whose applications are sitting on someone’s desk will see even greater delays, with thousands more falling through the cracks for each day."

Borrowers with disputes about their loans might have a harder time reaching the department if most staff are furloughed, Yu added.

"Navigating the disputes is already difficult, and it’s likely to become impossible in the case of a shutdown," she said.

What borrowers should know

Yu said her advice to borrowers remains the same during a shutdown: know who your servicer is and keep records of each time you reach out to make payments or try to make changes to your plan.

"Document everything," Yu said. "If and when things go wrong, that will be vitally important."

Mayotte said most borrowers won't "feel" the shutdown if it lasts as long as previous shutdowns have.

"Remember that most of the functionality is done by outside vendors, and they will continue at least for the foreseeable future," Mayotte said. "If, for some reason, the shutdown goes on for a very long time, then start paying attention to the studentaid.gov website to see if anything changes."

If the shutdown lasts longer than a week, the director of budget service within the Office of Planning, Evaluation, and Policy Development would be responsible for adjusting the department’s plan.

Reach Rachel Barber at rbarber@usatoday.com and follow her on X @rachelbarber_

This article originally appeared on USA TODAY: What happens to student loans when the government shuts down?

Reporting by Rachel Barber, USA TODAY / USA TODAY

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