POTENTIAL GOVERNMENT SHUTDOWN
The U.S. Department of Education’s contingency plan for a lapse in Fiscal Year (FY) 2026 appropriations outlines how the Office of Federal Student Aid (FSA) will continue core operations despite reduced staffing.
If a shutdown occurs, FSA would furlough about 632 of its 747 employees, retaining only around 115 staff to handle essential functions. Critical activities funded through mandatory and multi-year appropriations—such as Pell Grants and Federal Direct Loans—will continue. There should be no impact to automated systems such as COD and G5 cash ordering other than the already communicated outage with G5 for system updates from 3pm Sept 30th to 5pm Oct 1st. This ensures that students can still receive financial aid and loan servicing will proceed without interruption. Borrowers remain responsible for making loan payments during the shutdown.
Key FSA functions that will continue include:
- Processing Free Applications for Federal Student Aid (FAFSA®)
- Disbursing Pell Grants and Federal Direct Loans to students and schools
- Servicing and collecting federal student loans
- Maintaining pre-funded contracts that support aid disbursement, loan servicing, and legal operations
- Conducting required rulemakings to meet statutory deadlines
Non-essential activities, such as administrative work unrelated to direct aid delivery, will pause. Most affected staff will only return if needed to prevent significant damage to critical functions.
In summary, while a federal funding lapse would result in large-scale furloughs at FSA, the distribution of student aid and loan servicing operations are safeguarded through permanent and advance funding. Millions of students and schools should experience minimal disruption to core financial aid services.
