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What happens to government-issued loans during the shutdown?

How the government shutdown affects your federal student loans, SBA loans and mortgages.

A government shutdown means that the people processing your federal student loans, Small Business Administration (SBA) loans or government-backed mortgages might not be working. Depending on the type of loan, you might have a hard time applying, repaying or making changes to your loan. And even after the shutdown is over, expect delays.

What happens to government-issued loans during the shutdown?

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.

  • Federal student loans. You can still make repayments as usual, but might run into some snags if you want to discharge, apply for forgiveness or consolidate your federal loans.
  • SBA loans. You can still make repayments, but new applications are currently on hold.
  • Government-backed mortgages. You can still make repayments, but new applications for most mortgage programs are on hold or experiencing processing delays.

How does the government shutdown affect my federal student loans?

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.

Can I apply for a new federal student loan during the shutdown?

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.

4 student loan applications affected by the government shutdown

Want to make changes to your student loan? You might run into some issues with the following applications:

  • Applying for student loan discharge. Having your loan discharged due to a medical disability requires DoE approval. Applications won’t be processed until after the shutdown is over.
  • Applying for student loan forgiveness. Public Service Loan Forgiveness (PSLF) also requires approval from the DoE. FedLoan — the student loan servicer that handles PSLF applications — is still open, however, so you can contact customer service with questions.
  • Applying for an income-driven repayment plan. If you need tax transcripts to verify your income with your servicer, you might run into trouble qualifying for your income-driven repayment plan for next year. If you submit other documentation like pay stubs, you could end up having to pay a higher percentage of your income.
  • Applying for a Direct Consolidation Loan. The DoE also handles some aspects of the Direct Consolidation Loan application process. So you won’t be able to combine your federal loans into one monthly payment until after the shutdown ends.

I’m a furloughed employee struggling to make repayments. What should I do?

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

What are my alternatives to federal student loans?

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.

Compare private student loan and refinancing options

Name Product APR Min. Credit Score Loan amount Loan Term
Purefy Student Loan Refinancing (Variable Rate)
1.88% to 5.54%
$5,000 - $300,000
5 to 20 years
Refinance all types of student loans — including federal and parent PLUS loans.
Credible Student Loan Refinancing
1.80% to 7.74%
Good to excellent credit
Starting at $5,000
5 to 20 years
Get prequalified offers from top student loan refinancing providers in one place.
SoFi Student Loan Refinancing Variable Rate (with Autopay)
1.74% to 6.59%
Starting at $5,000
5 to 20 years
A leader in student loan refinancing, SoFi can help you refinance your loans and pay them off sooner.
Splash Financial Student Loan Refinancing
1.74% to 6.15%
Starting at $7,500
5 to 25 years
Save on your student loans with this market-leading newcomer.
Education Loan Finance Student Loan Refinancing
1.86% to 6.01%
Starting at $15,000
5 to 20 years
Lower your student debt costs with manageable payments, affordable rates and flexible terms.
Earnest Student Loan Refinancing
1.74% to 5.74% APR with autopay
$5,000 - $500,000
5 to 20 years
Get a tailored interest rate and repayment plan with no hidden fees.
Supermoney student loan refinancing
Starting at 1.9%
No minimum credit score
$5,000 - $300,000
5 to 20 years
Compare options to combine both private and federal debts into one monthly payment.

Compare up to 4 providers

Name Product APR Min. Credit Score Loan amount Loan Term
EDvestinU Private Student Loans
4.092% to 8.609% with autopay
$1,000 - $200,000
7 to 20 years
Straightforward student loans for undergraduate and graduate students.
CommonBond Private Student Loans
3.74% to 10.74%
$5,000 - $500,000
5 to 15 years
Finance your college education through this lender with a strong social mission and terms that fit your budget.
Edvisors Private Student Loan Marketplace
Varies by lender
Varies by lender
Varies by lender
Varies by lender
Quickly compare private lenders for your school and apply for the right student loan.
Credible Labs Inc. (Student Loan Platform)
Starting at 0.99% with autopay
Good to excellent credit
Starting at $1,000
5 to 20 years
Get prequalified rates from private lenders offering student loans with no origination or prepayment fees.

Compare up to 4 providers

How does the government shutdown affect my current SBA loan?

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.

What happens to my SBA loan application during the shutdown?

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.

What are my alternatives to SBA 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.

Compare business loans to apply for during the shutdown

Name Product Filter Values Loan amount APR Requirements
Biz2Credit business loans
Finder Rating: 4.7 / 5: ★★★★★
Biz2Credit business loans
$25,000 – $6,000,000
Starting at 5.99%
6+ months in business; $100,000+ monthly revenue; 500+ credit score
Get only the capital you need through secure, prescreened lenders with this highly rated company offering SBA, expansion, working capital and other loans.
OnDeck short-term loans
Finder Rating: 4.6 / 5: ★★★★★
OnDeck short-term loans
$5,000 – $250,000
As low as 35%
600+ personal credit score, 1 year in business, $100,000+ annual revenue, active business checking account
A leading online business lender offering flexible financing at competitive fixed rates.
Fora Financial business loans
Finder Rating: 4.1 / 5: ★★★★★
Fora Financial business loans
$5,000 – $500,000
6+ months in business, $12,000+ monthly revenue, no open bankruptcies
Get qualified for funding in minutes for up to $500,000 without affecting your credit score. Best for companies with at least six figures in annual revenue.
Lendio business loans
Finder Rating: 4.75 / 5: ★★★★★
Lendio business loans
$500 – $5,000,000
Starting at 6%
Operate business in US or Canada, have a business bank account, 560+ personal credit score
Submit one simple application to potentially get offers from a network of over 300 legit business lenders.
ROK Financial business loans
Finder Rating: 4.7 / 5: ★★★★★
ROK Financial business loans
$10,000 – $5,000,000
Starting at 6%
Eligibility criteria 3+ months in business, $15,000+ in monthly gross sales or $180,000+ in annual sales
A connection service for all types of businesses — even startups.
Fundbox lines of credit
Finder Rating: 4.2 / 5: ★★★★★
Fundbox lines of credit
$1,000 – $150,000
Not stated
6 + months in business, $100,000+ in annual revenue, 600+ credit score
Get flat rate, short-term financing based on the financial health of your business, not your credit score.

Compare up to 4 providers

What happens to my government-backed mortgage during the shutdown?

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:

  • FHA mortgages. The Federal Housing Administration (FHA) is still funding single-family home loans with delays. However, it’s not processing reverse mortgages or Title I applications.
  • VA mortgages. The Veteran’s Administration (VA) is still processing mortgages with delays.
  • USDA mortgages. The US Department of Agriculture (USDA) currently isn’t processing mortgage applications 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.

Bottom line

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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