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It depends on the loan program. Some government loan programs have completely stopped during the shutdown, while others are just experiencing delays. If you already have a loan, your repayments likely won’t be affected.
The government shutdown mainly affects borrowers who want to make changes to or apply for a new federal loan. The companies that handle repayments — your servicer — are not affected by the shutdown because they’re private businesses with government contracts. You should be able to contact customer service, make repayments and apply for deferment or forbearance just like normal.
However, you’ll likely run into problems if you want to make changes to your loan that relies on the Department of Education (DoE) or IRS — basically, anything that requires income verification or government approval. This includes applying for forgiveness or discharge, consolidating your loan and taking out a new loan in some cases.
You still can apply for a new federal student loan, though you might run into some snags. Some student loan applicants are require to verify their income when filling out the FAFSA.
The most common way to verify your income is by uploading tax transcripts from the IRS. However, the IRS’s tax transcript service is closed until January 14 and will have a backlog when it reopens. It could take a while for your application for aid to get approved, even after it’s up and running.
Want to make changes to your student loan? You might run into some issues with the following applications:
Reach out to your servicer to learn what your options are. Some might suggest deferring or going into forbearance until after the shutdown is over. However, pausing your loans can be a costly move — the interest that adds up during that period gets added to your loan balance.
Several credit unions are currently offering special zero- or low-interest loans to federal employees on furlough, while some banks are allowing furloughed employees to overdraw from their checking accounts without penalty. These options could both be cheaper than deferment or forbearance.
Financing options for government employees affected by the shutdown
Concerned about getting financing for next semester? You might want to look into private student loans as an alternative. These tend to come with slightly higher rates and less competitive terms than federal loans, and you may need to apply with a cosigner to qualify.
If you’re interested in consolidating your loans as soon as possible, consider refinancing with a private company. You might even get more competitive rates if you have an unsubsidized loan. However, you’ll lose benefits like income-based repayment plans and eligibility for PSLF.
The government shutdown doesn’t affect anyone with a current SBA loan. That’s because private lenders handle repayments — not the SBA. You can also still reach out to customer service during regular operating hours if you have any questions about your loan.
You won’t be able to apply for a new SBA business loan during the government shutdown — including the popular 7(a) and 504 programs. The SBA has stopped most of its operations during the shutdown, including its business loans programs. It also isn’t processing applications for programs to help businesses qualify for government contracts, nor is it offering seminars for business owners.
However, you can still apply for and repay an SBA disaster loan, since the Office of Disaster Assistance is open during the shutdown. You can learn more about what to expect by reading our guide to disaster loans.
SBA loans aren’t the only inexpensive way to fund your business. Business owners who had hoped to qualify for government-backed funds might want to consider loans from credit unions, community development financial institutions (CDFIs) or online lenders instead.
Credit unions and CDFIs are non-profit lenders. They can often be more open to startups or those that have had trouble qualifying for funding in the past — especially if you service an underserved community. And online lenders typically have fewer eligibility requirements, which can help newer businesses and business owners with less-than-perfect credit find financing.
If you already have a government-backed mortgage, the government shutdown shouldn’t affect your repayments. You should also still be able to contact your lender’s customer service team with any questions or issues you have.
Planning on applying for a new government-backed mortgage? You might want to wait until after the shutdown is over. The government isn’t processing many mortgage applications at this time. And even those they are processing face major delays due to the reduced staff.
Here’s what you can expect from common government-backed mortgage programs during the shutdown:
Any mortgage application could also be affected if it requires you to provide tax transcripts, since the IRS tax transcription service is currently closed.
The current shutdown means you could have trouble applying for or making changes to government-issued loans. But if you’re making repayments on a current loan, it’s more than likely business as usual. If you need a loan within the next few months, you may want to consider private alternatives instead.
Check out our guides to private student loans, student loan refinancing providers, business financing and home loans to get started on your search for a competitive deal.
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