Student loan borrowers blocked from forgiveness

Early Wednesday, the U.S. government shut down after lawmakers failed to reach a funding deal, meaning that federal workers across agencies will be temporarily put on unpaid leave.

In a Sept. 28 memorandum, U.S. Department of Education Secretary Linda McMahon estimated it would take half a day to complete shutdown activities at the agency and that 1,485 employees out of the 1,700 remaining would be furloughed.

The Trump administration’s termination in March of nearly half of the staff at the Education Department already included many of the people who assisted borrowers in the Federal Student Aid office. Those cuts have led, in part, to a pileup of applications from borrowers trying to access repayment plans and a debt forgiveness program required by Congress.

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More than a million borrowers are in a backlog to enroll in an income-driven repayment plan, according to court records from mid-September. Meanwhile, 74,510 people are waiting for a determination from the Education Department on their Public Service Loan Forgiveness status. (IDR plans cap borrowers’ bills at a share of their income each month, and PSLF leads to debt erasure for public servants after a decade.)

Some of the borrowers CNBC has spoken with in recent months have already been waiting six months or more for a PSLF determination.

During the shutdown, Federal Student Aid staff “will not be able to perform regular operations, including working on the IDR backlog,” a spokesperson for the Education Department told CNBC.

The shutdown risks exacerbating the current crisis for borrowers, said Randi Weingarten, president of the American Federation of Teachers. The AFT filed a class-action complaint in September against the Trump administration, and has said the Education Department is denying student loan borrowers the rights to which they’re legally entitled.

“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,” Weingarten said.

During the lapse in government funding, Kantrowitz said, “there will be nobody at the U.S. Department of Education to provide final approval for the forgiveness of a borrower’s loans.”

Still, in McMahon’s memo, she writes, “borrowers are expected to continue repayment throughout a shutdown.”

More than 40 million Americans hold government-issued student loans, and they owe more than $1.6 trillion.