Shutdown Would Block Work Study Funds And Student Loans To Low-Income Students

The odds of a government shutdown seemed to increase last night, as another meeting between Senate Majority Leader Harry Reid (D-NV), President Obama, and Speaker of the House John Boehner (R-OH) failed to produce a deal to fund the government for the rest of fiscal year 2011. Though the parties are only about $5 billion apart when it comes to spending reductions, House Republicans are insisting on a number of policy riders unrelated to the budget, including provisions crippling the EPA’s ability to regulate greenhouse gases and restricting funding to Planned Parenthood.

A shutdown would have many negative economic effects, including blocking loans to small businesses, preventing tax refunds from being disbursed, and even shaving a small percentage off of economic growth. And according to the Department of Education, while most student loan programs were front-funded and won’t be affected by a shutdown, federal work-study funds and some loans to low-income students will be prevented from going out during a shutdown:

Although most student federal aid programs would not be impacted by a shutdown, colleges and universities would not be able to draw down and disburse to students any campus-based program awards, such as work-study or the Federal Perkins Loan Program. The impact on the $951 million work-study program would affect about 590,000 students in approximately 3,400 participating institutions. Perkins affects about 673,000 students in some 1,600 participating institutions.

The Perkins loan program provides low-interest loans to low-income students. This program is affected by a shutdown because it is a revolving loan fund, “from which new loans are made as older loans are repaid.”

In addition to students who rely on these programs, students who attend the University of the District of Columbia would also be affected by a shutdown, as the school will be forced to close for the duration of the shutdown. During the government shutdown of 1995, UDC was forced to “shut down for several weeks.”