With a default on the federal debt obligations perilously close to becoming reality, Central Michigan University is attempting to assess the damage not raising the debt ceiling would cause to the university.
Thursday marks the final day for Congress to raise the nation’s borrowing limit beyond the current $16.7 trillion. Lawmakers are embroiled in a battle over government spending, health care reform and re-opening the partially shut down government. While progress has been made in the Democratic-controlled Senate in recent days over a potential deal between party leaders, it is unclear if said deal could pass the Republican-controlled House of Representatives.
While it is unknown exactly what would happen in the case of a debt ceiling breach, most economists agree a breach would be catastrophic. The government would have to prioritize which programs, from Social Security to federal loans, it could fund before a final default in the following days, likely triggering a global recession and destroying the U.S. Treasury note’s standing as the global currency.
Rising interest rates and a potential stock market decline would cause financial difficulties for some students with bills to pay, as well as affecting those relying on investments to pay for tuition, CMU Provost Michael Gealt said.
“We’re still trying to figure out a lot of this,” Gealt said. “Impacts on the stock market may impact some people’s ability to pay tuition. Some people are taking money out of their investments to pay their tuition.”
Federally-funded programs CMU and students rely upon, including tuition assistance programs and federal research grants, could be in danger as the Treasury chooses which programs it should fund.
In an email to Gealt, Director of Student Services-Off Campus Jody Hassen said federal agencies would not be able to pay tuition and that students receiving tuition assistance from the government will have to find a way to self-pay to stay enrolled in classes until the money is available again.
Hassen said the Army recalled all pre-approved tuition assistance on Oct. 2 because of the government shutdown. Subsequently, roughly 60 percent of CMU ROTC students have chosen to self-pay for this semester.
Gealt also said two ROTC employees were furloughed because of the shutdown.
However, Director of the Veterans’ Resource Center Steve Rellinger said it is difficult to know for sure what kind of impact default would have on the ROTC at this point.
Federally funded research will take a serious hit if a resolution is not passed. Gealt said that while current projects have already been paid for and will continue, there are no new federal grants that can be applied for due to the shutdown, and a debt ceiling breach would hurt things further.
“The shutdown has been devastating to long-term research,” Gealt said. “I know people working in Antarctica being brought back from the field. Long term ecological research stations across the country are also being shut down and there’s going to be gaps in data.”
If no solution is reached by Oct. 17, Gealt said it would still take until November to really begin to feel the impact.
“The university is fiscally very sound, we have money in reserves,” Gealt said. “We have money in the bank with the intention that this might be spent on something, and a lot of it is just our savings. It’s good to have it for occurrences like this.”