This bill would suspend all payments on federal student loans issued under Part D of Title IV of the Higher Education Act for “covered individuals”—federal employees and qualifying contractors—during any period in fiscal year 2026 or later in which there is a lapse in appropriations of 14 days or more. It defines who is a covered individual and expands coverage to contractors who support those employees.
The suspension is paired with no accrual of interest, and any suspended month would be treated as if the borrower had made a payment for the purposes of loan forgiveness programs. Credit reporting would treat suspended payments as regular payments.
The act would take effect retroactively to September 30, 2025, and allows refunds of any payments made during lapse periods if requested.
At a Glance
What It Does
During a 14+ day lapse in funding for a federal agency, the Secretary of Education must suspend payments on HEA Part D loans for covered individuals. Interest does not accrue during the suspension, and each suspended month counts toward loan forgiveness programs if eligible. Payments reported to credit bureaus reflect the suspension as if a regular payment had been made.
Who It Affects
Federal employees and qualifying contractors whose loans are under Part D of Title IV, and the agencies and loan servicers involved in those loans. It also affects consumer reporting agencies due to altered payment reporting during suspensions.
Why It Matters
Creates a predictable debt-relief mechanism for workers during funding gaps, preserves credit standing during suspensions, and aligns loan forgiveness with actual payment history during a lapse. It codifies retroactive timing to begin relief in the 2025-2026 window.
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What This Bill Actually Does
The Shutdown Student Loans for Feds Act establishes that, when a federal agency experiences a lapse in appropriations of 14 days or more, payments on certain federal student loans are paused. The target loans are those under Part D of Title IV of the Higher Education Act, and the beneficiaries are federal employees and certain contractors who support those employees.
While payments are paused, interest does not accrue, and the months of suspension are counted toward eligibility for loan forgiveness programs that would have required payments. The bill also instructs that suspensions be reported to credit bureaus as if regular payments were being made, to avoid harming credit scores during the lapse.
It includes a retroactive start date to September 30, 2025, and authorizes refunds of any payments already made during eligible lapse periods if the borrower requests one. The secretary would implement these provisions and oversee the transition, including how refunds and forgiveness qualifications are handled under current law.
The Five Things You Need to Know
The bill applies only during agency lapses in appropriations of 14 days or more, starting in FY 2026.
Only loans under Part D of Title IV of the HEA are eligible for suspension and relief.
Interest does not accrue on suspended loans during the lapse period.
Each suspended month is treated as a payment for loan forgiveness program purposes under Part D.
The act has a retroactive effective date to September 30, 2025 and allows refunds of payments made during lapse periods upon request.
Section-by-Section Breakdown
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Short title
The act may be cited as the Shutdown Student Loans for Feds Act. This section provides the formal naming of the statute and sets the stage for the relief provisions that follow in Section 2.
Federal student loan borrower relief for federal employees
This section defines who counts as a 'covered individual' for purposes of debt relief—federal employees and certain contractors who support them. It authorizes the Secretary of Education to suspend payments on loans under Part D of Title IV of the HEA during any 14+ day lapse in agency appropriations in fiscal years 2026 and beyond. While payments are suspended, interest does not accrue, and the months of suspension may be treated as payments toward loan forgiveness programs. The section also requires that, for credit reporting, suspended payments be treated as if they were regularly scheduled payments. Finally, it provides a retroactive effective date and a refunds mechanism for payments made during eligible lapse periods.
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Explore Education in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Federal employees with HEA Part D loans experience direct relief from payment obligations during funding gaps.
- Contractors who provide services to covered federal employees are included as beneficiaries when they fall under the defined covered individual category.
- Loan forgiveness program administrators and the Department of Education gain clear implementation rules for suspensions, ensuring consistent treatment of suspended months.
Who Bears the Cost
- The U.S. Treasury, and by extension the federal budget, bears the cost of suspending payments and waiving interest for the covered loans subject to lapse periods.
- Loan servicers and agencies responsible for administering these loans must adjust systems and processes to implement suspensions, contact borrowers, and reflect suspension status in records.
- Consumer reporting agencies face changes to how suspended payments are reflected in credit reports, which may require adjustments to reporting workflows and data feeds.
Key Issues
The Core Tension
The core dilemma is balancing immediate debt relief for federal personnel during funding gaps with the fiscal costs and administrative complexity of suspending payments, processing forgiveness eligibility, and correcting credit records across a dispersed federal workforce.
The policy creates a targeted relief mechanism tied to funding lapses, but it raises questions about how broadly it should apply (only during 14+ day lapses, and only for HEA Part D loans). It also depends on the administrative capacity of the Department of Education to suspend payments, track forgiveness eligibility, process retroactive refunds, and coordinate with credit reporting agencies.
The bill does not specify automatic refunds for all payments made during every lapse period, leaving room for individual requests. The financial impact rests with the federal budget, and the effect on loan forgiveness metrics will hinge on how 'months of suspension' interact with existing forgiveness rules.
Practitioners will want to watch for clarifying guidance on implementation timelines and uniform application across agencies.
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