How Education, Student Loan Repayment And Research Suffers If Government Shuts Down

The potential pause of government services on Oct. 1 casts a shadow on various sectors — not least of which are education and research institutions.

Universities, colleges, and other educational entities face disrupted operations. Halted federal funding will stall initiatives, impact students, and hurt research projects.

Universities And Colleges: A government shutdown hurts universities and colleges, particularly those reliant on federal funds. Daily operations and long-term projects face disruptions, especially in areas like financial aid, research grants, and federally funded educational programs.

The Department of Education could see more than 90% of its staff furloughed according to 2021's contingency plans. Expect delays on planned regulatory actions and negotiations over student loan forgiveness.

For example, the University of Colorado Springs already alerted its students to potential impacts on federally funded research activities and other operations, depending on the shutdown’s length.

Students: Students, especially those dependent on federal financial aid, would bear the brunt of the shutdown, according to Inside Higher Ed. A skeletal staff at the Department of Education will suspend support for individual cases and inquiries.

Federal Student Loan payments will resume. However, they could face complications, with concerns over more chaotic and difficult navigation for borrowers due to reduced staff and services.

Consumers relying on loan servicers might find themselves in a tight spot as well. Payments to those entities are likely to be disrupted in case of a prolonged shutdown. This will affect their ability to manage student loan payments on the government's behalf.

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Research: A government shutdown would impact a backlog of research activities, and delays in grant processing. Universities won’t start new grants. Funding for active grants up for renewal or no-cost extensions may not be processed.

Economic Impact: The broad market S&P 500 (NYSE:SPY) has historically made gains in past government shutdowns. Stocks and ETFs related to education and research sectors could see some volatility.

Traders may want to add stocks like SoFi Technologies Inc (NASDAQ:SOFI), Global X Education ETF (NASDAQ:EDUT), ROBO Global Robotics and Automation Index ETF (NYSE:ROBO), and Strategas Global Policy Opportunities ETF (NYSE:SAGP) to their watchlists.

While short-term shutdowns typically have limited impacts, the repercussions grow with the shutdown’s duration. The current situation, with legislative obstacles and a ticking clock, paints a concerning picture for education and research institutions if it lasts longer than a few weeks.

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