Letter to the editor: How the government shutdown affects students

Well, here we are in a fine mess.

Congress has gone rogue on us and can’t pass a “continuing resolution” that would keep funding the federal government at last year’s levels. The Legislature should actually pass a real budget for this year, but Congress is so dysfunctional that its members rarely can get their act together and pass a budget.

Many of my students have been asking me what consequences the shutdown would have on their lives. More significantly they wonder about the potential of a default of the financial obligations of the federal government. That could come if the borrow authority of the government, in other words the “debt ceiling,” is not increased.

The federal government sells treasury bonds to investors and then uses those funds to operate the many government programs. The federal government has always borrowed with the exception of a few extraordinary years. Today, China and other foreign nations as well as American investors and mutual funds buy those bonds because they pay a nice interest rate and were considered a very safe investment. Safe, that is, until this train wreck in Washington.

A “default” happens when a debtor — the U.S. government in this case — does not meet his legal obligation according to the contract. In other words, it has not made a scheduled payment. That would have huge reverberations throughout the global, and therefore the U.S., economy. It could hit students hardest in terms of getting short-term jobs — think the Mall, retail stores, etc. — because consumer demand would evaporate as people hang on to their money. I talked to a big box store manager in central Iowa this week and he said traffic was noticeably down since the government shutdown.

A bigger financial crisis, such as continued uncertainty about the debt of the United States, will lead to a contraction of the economy, fear and loathing in the business community, and job stagnation which could deeply affect graduating students.

Already one of my students talked to me about her dad being furloughed from his federal U.S. Department of Agriculture job. There are probably hundreds of students in the same situation. Moreover, probably hundreds of thousands of Americans working for government subcontractors are being furloughed as well, and they are not even being reported because they are technically not “federal employees.” For families with students in college, that loss of income — especially if prolonged — could be catastrophic given the costs of college.

College students also benefit from many government programs, especially student scholarships and student loans. A government shutdown or default could result in financial aid not being processed.

Another area of concern is food stamps or what is now called the Supplemental Nutrition Assistance Program. It is surprising how many college students, who generally are quite low income and often have families, need this assistance to make ends meet.

Finally, we have many veterans returning to college and some disabled vets. The payments by Veteran’s Affairs to those students could also suffer from the malfunction in Washington.

As I always say, we are actually not aware on a day-to-day basis of how much we benefit from so many programs that are designed to improve our opportunities and make us happier and more successful. A government shutdown clarifies that and perhaps makes us appreciate our government more.