Summary of impact of 2013 federal government partial shutdown on postsecondary institutions

As the federal government partial "shutdown" concludes its second week, the long-term implications for postsecondary institutions and students receiving federal financial aid remain murky. In the meantime, however, the U.S. Department of Education (ED) and other agencies have issued statements describing the short-term impact of the shutdown on their services and operations, which are summarized below. Recipients of military or veterans assistance may be the most directly affected. The military branches particularly have stated that tuition assistance has been suspended for classes with start dates during the shutdown.

The effects of the shutdown are a “moving target,” particularly as the debt ceiling deadline approaches, but this summarizes the known effects as of this date. We have also been tracking news reports on the impact of the shutdown on higher education, and thus far those press reports have been fairly consistent with the agency statements, as noted below.

DEPARTMENT OF EDUCATION – STAFFING

ED is operating in accordance with a published "Contingency Plan."¹ Pursuant to this plan, the agency may now begin "phasing in" employees up to a total of not more than 6% of ED's total FTE staff.² It does not appear to have chosen to do so yet, however, instead retaining a mere 212 of its 4,225 employees. Determinations regarding which staff members should continue to work are made under a "significant damage standard," which places priority on continued delivery of student aid.³

Patricia Dickerson, former senior executive in Federal Student Aid at ED, says that select staff members are monitoring backlogs in emails and telephone calls to prevent them from "jamming" the systems, but they are prohibited from responding or working over four hours per day. We understand that new applications and other submissions, including requests for refunds, are just sitting in the queue and cannot be processed. Under usual conditions, each FSA team must process as many as 100 actions per week, or up to 800 actions per week for ED as a whole.

FEDERAL STUDENT AID – FUNDS FLOW

Most of the federal student aid functions at ED remain at least partially operational. Disbursements are continuing for programs with mandatory or multi-year funding, including Pell Grants and Federal Direct Student Loans, without reports of major glitches. FSA promised that a shutdown would result in "minimal impact" on schools, lenders, and guaranty agencies, including the student aid application (FAFSA) process, the delivery of student aid, and repayment functions,⁴ and that seems to be the case so far. FSA has also stated that it will continue to process loan consolidation applications and Direct Loan promissory notes—at least for the time being.

To the extent that there are reports of problems, they appear to be episodic. We hear reports that the IRS data retrieval system is not working reliably, so that institutions cannot obtain IRS tax data to confirm student income information and complete verification to make disbursements to affected students. We also understand that certain ED systems, such as COD or Edconnect, are sometimes non-functional for short periods. And requests for technical support to address problems in the institutions’ interactions with COD or other systems are being processed much more slowly.

Regardless of when the shutdown ends, any failure to raise the debt ceiling could mean that the U.S. Treasury Department will "run out of borrowing options in mid-October," thus disrupting student aid funding.⁵

MILITARY TUITION ASSISTANCE

Branches of the military have posted instructions advising that tuition assistance funds are currently unavailable or that tuition assistance requests for classes with start dates during the shutdown will not be paid (in the near term or long term).⁶ The Department of Defense is advising more generally that processing of previously submitted education claims are "anticipated to continue through late October" or until available funds are exhausted.⁷ The Secretary of the Department of Veterans' Affairs similarly testified to the House that, if the shutdown drags into late October, claims processing for education benefits will be "suspended due to lack of funding."⁸ This means that veteran students will not receive their monthly housing allowance that would normally be disbursed on November 1. Thus, existing tuition assistance claims will be subject to delayed processing due to staffing deficiencies, new tuition assistance requests will likely be denied, and even housing allowances will soon be in jeopardy.

GAINFUL EMPLOYMENT NEGOTIATED RULEMAKING

The negotiations on this draft regulation have been stalled since ED personnel cannot review the proposed revisions, as filed on or about October 1. ED also has indicated that, if the shutdown persists beyond October 11 (today), it will be unable to hold the next negotiation session scheduled for October 21, so there is a very strong likelihood that the upcoming session will have to be deferred. We understand that ED and the negotiators are considering rescheduling this session for November (and possibly adding a third session to allow time to discuss this complex and contentious rule).

GRANT PROGRAMS

Race to the Top, Investing in Innovation, and Promise Neighborhoods have funds available to the end of 2013.⁹ ED's "G-5" grant system website will remain operational for routine, automated transactions, including drawdown of FSA funds.¹⁰ Submissions and processing of research proposals to other agencies such as the NIH or NASA have been impacted significantly. Each agency is providing its own instructions.

EDUCATION-RELATED DATA SOURCES

The Institute of Education Statistics has shut down all systems that host "nces.ed.gov."¹¹ This precludes access to data housed by the National Center for Education Statistics, including the Integrated Postsecondary Education Data System (IPEDS) and the College Navigator system for consumers. Research in some college and university classes has been stymied by lack of access to frequently used government databases, such as those maintained by the Census Bureau.¹²