Federal Update - October 8

October 8, 2025

GOVERNMENT RELATIONS HIGHLIGHTS

Washington Standstill: No progress on funding stalemate 

No Deal, No Movement: Filibuster stymies resolution of shutdown 

RISE Committee Convenes: ED begins OB3 rulemaking 

Court Sides with ED: GE rule stands for now 

Loan Pause Skews Default Data: ED releases FY2022 rates 

SHUTDOWN HITS WASHINGTON

What You Need to Know 

The shutdown of the federal government has now stretched into its second week, leaving hundreds of thousands of federal employees furloughed or working without pay. Under federal law, agencies must halt all non-essential operations when Congress fails to pass funding legislation. So far, negotiations between Congress and President Trump have stalled, with no clear path to resolution. 

Why This Is Important 

At ED, approximately 95% of staff outside of FSA have been furloughed. While Pell Grants and Direct Loans remain operational for now, if the shutdown were to extend for a prolonged period, FSA operations could eventually suffer. The longest shutdown in US history was 35 days in 2018, though that was only a partial shutdown and did not impact ED because the agency was fully funded at the time. President Trump and OMB Director Russell Vought have signaled that additional layoffs may be forthcoming across the federal workforce, potentially compounding the effects of the Department’s previous cuts and raising concerns about long-term capacity at the agency. 

CONGRESS REMAINS STUCK

What You Need to Know 

Efforts to resolve the government shutdown remain stalled in the Senate, where Republicans lack the votes to pass a funding bill on their own due to the filibuster and the defection of Senator Rand Paul (R-KY). Despite needing eight Democratic votes to advance a continuing resolution, GOP leadership has yet to engage in substantive negotiations. Senate Majority Leader Thune continues to hold show votes on two competing proposals, neither of which has sufficient votes to clear the 60 vote threshold needed to pass, signaling no immediate path forward.  

Why This Is Important 

The House remains out of session, with Speaker Johnson (R-LA) refusing to reconvene unless a deal materializes. Tensions have escalated as the Speaker has refused to swear in newly elected Representative Adelita Grijalva (D-AZ). Once Grijalva is formally seated, Republicans will have an even tinier majority, and she is expected to provide the pivotal 218th signature to facilitate the release of the Epstein Files. The political standoff continues to deepen, with no resolution in sight and House Republicans far from Washington.  

RISE NEG REG KICKS OFF

What You Need to Know 

On September 29, the Reimagining and Improving Student Education Committee (RISE) convened for the first of two sessions of negotiated rulemaking. The RISE Committee took up issues related to student loan limits, repayment, and rehabilitation based on requirements set forth in the One Big Beautiful Bill Act (OB3). The Department’s draft regulatory language, as introduced to the RISE Committee, closely mirrored language included in the legislation in most instances. Negotiators also addressed and vigorously debated the definition of “professional degree.” The RISE Committee will reconvene November 3-7. 

Why This Is Important 

Though many expected the negotiated rulemaking to be postponed due to the ongoing government shutdown, the RISE Committee persisted with in-person sessions. ED stated that the rulemaking had been deemed essential in order to meet deadlines prescribed by OB3. The Department also shared that it is exploring deviating from master calendar requirements in order to meet the statutory deadlines required by OB3, meaning that new regulations could go into effect as soon as mid-2026. 

GE LITIGATION DISMISSED

What You Need to Know 

On October 2, a federal district court ruled in favor of the Department’s request for summary judgment in AACS’s lawsuit challenging FVT/GE. The court found that “gainful employment” means programs must meet specific tests on how much graduates earn compared to their debt and to others in similar jobs.  

Why This Is Important 

For now, FVT/GE remains in effect. AACS is examining opportunities to appeal the decision. In light of new accountability rules under OB3, ED plans to review and possibly update FVT/GE during upcoming negotiated rulemaking sessions scheduled for December and January. AACS will share additional details regarding a potential appeal as they become available.  

ED DISTRIBUTES 2022 CDRs

What You Need to Know 

On September 22, the Department distributed fiscal year 2022 official cohort default rates to all eligible institutions. As anticipated, the 2022 rates were significantly impacted by the pause on federal student loan payments that began in early 2020. 

Why This Is Important 

Although virtually all institutions had a cohort default rate of 0.0% for fiscal year 2022, beginning in 2026, cohort default rates will take into consideration borrowers who entered repayment in 2023 and defaulted in 2023, 2024, and 2025. As a reminder, ED resumed collections on defaulted loans on May 5. Under the HEA, institutions will lose eligibility for federal student assistance programs if their CDR exceeds 40% for a single year or 30% for three consecutive years. 

For More Information

If you have any questions about this Update, please email info@myaacs.org.