What the Budget Showdown Means for Higher Education

by DLA Piper
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Well, it’s September 30th and that means is the end of the Federal Government’s fiscal year.  Before anyone bites into the cake, however, Congress still needs to pass a new budget (or continuing resolution.  Otherwise, the government will shut down.  Happily, the Department of Education (Department) updated the playbook for when the government shuts down.

As an aside, as we are also heading to a standoff over raising the debt ceiling, I humbly suggest the Department (assuming it has staff to do) offer information on what would happen if Congress does not raise the debt ceiling (in case you are interested, the Congressional Research Service put out a number of helpful reports we highlighted earlier this year).  The lack of information when this happened two years ago caused confusion and worry among students, parents and schools over what would happen to loans and grants, among other things.

As for the shut down, the Department’s memo explains there will not be very many folks working at the Department during a shutdown:

the Department would furlough over 90 percent of its total staff level [the Department has 4,225 full and part-time employees] for the first week of such a lapse.  During this first week, we would maintain only those excepted functions related to the discharge of the duties of Presidentially-appointed, Senate-confirmed individuals; those employees charged with the protection of life and property; and, as appropriate,  the obligation, payment, and support of student financial aid as well as other authorized payments and obligations.

For a longer shutdown, “at most, a total of not more than 6 percent of the total staff would be called back” to perform “excepted activities to prevent significant damage to the underlying activity.”  In short, 212 employees will be working during the first week and, if the lapse lasts more than 1 week, 242 employees will work at some point during the shutdown [approximately 3,983 employees would be furloughed].

In higher education, loans and Pell grants will continue as normal.   Further, staff and contractors associated with these programs will continue to work, although “only skeletal program operations would continue under the ‘significant damage’ standard.”  While it’s not clear what level of loan servicing is provided for with skeletal program operations, the memo notes “student financial aid services should continue  in order to avoid the potential loss of federal assets and to maintain the delivery of student aid.”

Campus-Based aid programs, however, will not be so lucky.  Indeed, “FSA employees working in areas not directly related to Pell Grants or Direct Student Loans, such as the Campus-Based Programs of College Work-Study and Supplemental Educational Opportunity Grants, customer service activities, administrative functions not related to providing student aid to schools and students, and development of new programs or activities, would not be excepted.”  Thus, if you are awaiting funds from the government out of these programs, you will be out of luck.

In addition, as a general matter, grants awarded by the Department previously (not student aid) should continue as normal for the first week.  “For a lapse of more than a week, Department staff would be needed as excepted employees to monitor the contractors and resolve any issues.”  In addition, grants awarded by the National Institutes of Health and the National Science Foundation will also be affected.  Under contingency plans authored by the Department of Health and Human Services and the National Science Foundation, grantees working on existing grants could continue their work to the extent funds are available and grantees do not require assistance from agency staff.  Neither agency will take any actions on new grant applications or awards.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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