It is 'abundantly clear' student-loan payments should not resume next week if the government shuts down, Ayanna Pressley says

Ayelet SheffeySep 28, 2023, 02:59 IST

Business Insider

Representative Ayanna Pressley speaks as student loan borrowers and advocates gather for the People's Rally To Cancel Student Debt During The Supreme Court Hearings On Student Debt Relief on February 28, 2023 in Washington, DC.Jemal Countess/Getty Images for People's Rally to Cancel Student Debt

The government will shut down in three days if Congress doesn't reach a funding agreement.
That's the same day student-loan payments are set to resume.

Rep. Ayanna Pressley does not want student-loan borrowers to worry about repayment and a government shutdown at the same time.

If Congress does not reach an agreement on funding the government by September 30, Americans will face yet another government shutdown. With that deadline just days away, that prospect is looking increasingly likely — and it would also fall the same day federal student-loan borrowers could start facing monthly bills again after an over three-year pause.

Pressley said in a Wednesday statement that President Joe Biden should pause student-loan payments and interest accrual if a shutdown does happen, and that "it is abundantly clear that student loan payments should not resume October 1."

"To throw borrowers back into repayment with bad faith loan servicers and an under-staffed Department of Education is a recipe for disaster and would deeply undermine the progress we have made to advance economic justice for student loan borrowers," Pressley said in a statement.

"While the Administration works diligently to push back on the corrupt Supreme Court's obstruction of President Biden's historic cancellation plan, we should take immediate steps to prevent borrowers from entering into repayment at a time when the infrastructure is not there and bad actors will seize on the lack of government capacity caused by Republican dysfunction," she continued.

The Education Department has not indicated it would pause payments in the event of a shutdown, and it would likely encounter pushback from Republican lawmakers who codified the end of the student-loan payment pause in the debt-ceiling bill Biden signed into law in June.However, Pressley's call indicates concerns of trouble within the loan servicing industry if it finds itself with limited money in a time when it needs resources the most. Under Secretary of Education James Kvaal has previously acknowledged the significant undertaking of this transition back into repayment, with the Education Department expecting five times more borrowers entering repayment than a typical year would bring.Additionally, while the Education Department has yet to release its updated contingency plans for a government shutdown, its 2021 version said that "not more than 11 percent of the total staff would be called back to work during a longer interruption." It also said federal loan servicing "could continue for a very limited time; these operations could also experience some level of disruption due to a lapse."At this point, Republican lawmakers in the House are still at odds over a funding agreement, so student-loan borrowers might have to transition back into repayment with limited funding to facilitate that return.

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It is 'abundantly clear' student-loan payments should not resume next week if the government shuts down, Ayanna Pressley says