What Happens to the FAFSA and Student Loans if the Department of Education Shuts Down?

It seems to be like federal pupil loans, together with the FAFSA, might find yourself being managed by the Small Business Administration after US President Donald Trump signed an govt order final week to start shutting down the federal Department of Education.Trump introduced that the SBA would “immediately” start dealing with your entire federal pupil mortgage portfolio, someday after press secretary Karoline Leavitt advised reporters that pupil loans and Pell Grants would nonetheless be run out of the Department of Education. Education Secretary Linda McMahon echoed Trump’s sentiments throughout an interview with CNN on Sunday. TAX SOFTWARE DEALS OF THE WEEK Deals are chosen by the CNET Group commerce group, and could also be unrelated to this text.”[Student loans] would be going to the Small Business Administration,”  McMahon stated. “There’s not going to be any defunding.”   One important operate of the division is the administration of federal pupil monetary assist like grants and pupil loans. If the Department of Education is closed, what does that imply for the Free Application for Federal Student Aid, or FAFSA?Actions by the White House have already weakened the Department of Education — on March 11, company staffing was slashed by practically half, and the studentaid.gov web site went down for hours. “These workforce reductions raise serious questions about the future functionality of federal aid programs,” pupil mortgage professional Elaine Rubin stated in an e-mail. “There has been little communication about how the department plans to sustain efficient operations and prevent disruptions.”If the SBA takes over administering pupil loans, it would accomplish that with fewer sources. The company introduced on Friday that it was chopping its workforce by 43%.  If you are anxious about filling out the 2025-26 FAFSA — or have already submitted it — here is what you could know.Is FAFSA going away?Even if the Department of Education is eradicated, consultants don’t assume federal pupil assist or FAFSA will disappear. “The software system and call center are through contractors, but there is still significant work done in-house,” pupil mortgage professional Mark Kantrowitz stated in an e-mail. “After last year’s FAFSA fiasco, terminating staff could be a disaster.”Rubin famous FAFSA is the “trigger application” for not solely federal monetary assist applications but in addition for a lot of state and institutional assist applications. “It would be a huge undertaking to replace the FAFSA, but that doesn’t mean that at some point it can’t be,” Rubin stated. Because a fancy internet of applications depend on the applying, “we don’t really anticipate the FAFSA going away at this time.”Where else might FAFSA go? More than 17 million individuals accomplished FAFSA within the 2022-2023 cycle. US Department of EducationEarlier than Trump’s announcement Friday, the obvious decisions for FAFSA’s new dwelling had been the Treasury Department or the Internal Revenue Service, because the FAFSA type already connects to the IRS system to add tax return information. Kantrowitz initially advised CNET that the Treasury Department could be the almost certainly vacation spot for pupil mortgage applications. After Trump’s announcement Friday, Kantrowitz famous that transferring pupil loans and FAFSA to the Small Business Administration would nonetheless require congressional approval.He added that regardless of which company takes it, the federal authorities should proceed to manage and handle pupil assist.”The states are incapable of handling student loans,” Kantrowitz stated. “Private lenders lack the capacity and appetite for privatizing the federal student loan portfolio.”If FAFSA does transfer, Kantrowitz stated, debtors could not discover a lot of a distinction, relying on who’s operating the applications.”Most functions [of student loan programs] are implemented through contractors,” he stated. “SBA lacks experience with managing and collecting student loans. If they transfer the relevant FSA staff and continue to use the existing student loan servicers, the disruption should be minimal. Otherwise, there is the potential for significant chaos and confusion among borrowers.”Should you continue to submit FAFSA?If you need assistance paying for faculty, consultants say it’s best to proceed to make use of FAFSA. The type is used to find out your eligibility for monetary assist, together with Pell Grants, scholarships, work-study applications and pupil loans.Rubin famous one group of people that have added considerations about finishing the FAFSA type: Students who have to report info from a mum or dad or partner who’s an undocumented immigrant. Applicants who’re non-US residents with qualifying documentation could also be eligible for monetary assist; the standing of economic “contributors” similar to dad and mom and spouses does not affect eligibility.The Privacy Act of 1974 forbids the company from sharing sure figuring out info with out written consent or an specific settlement. Under present agreements, the division shares FAFSA info for candidates — however not contributors — with the Department of Homeland Security to confirm an applicant’s standing. But this administration’s aggressive stance towards undocumented immigrants has many households anxious about submitting info that might be illegally shared with immigration authorities, Rubin stated.She does not have common recommendation for these candidates. “It really has to come down to … what’s best for the family and what they’re comfortable with.”What to anticipate should you submitted your FAFSA softwareIf you’ve got already submitted your FAFSA type, the Department of Education says it would course of your on-line software inside one to a few days (paper type submissions take longer). After your type is processed, you possibly can log in to StudentAid.gov to see your submission abstract and make corrections. However, due to the staffing cuts, it’s best to anticipate delays you probably have any questions or points along with your software, consultants warned.The abstract ought to embrace your Student Aid Index, which the division sends on to the faculties you listed in your FAFSA type. The colleges use your SAI to calculate the quantity of economic assist they will give you. If you are anxious your faculty hasn’t acquired your info to find out your monetary assist bundle, contact your faculty’s monetary assist workplace.