Federal Shutdown Begins: These Benefits and Services Face Immediate Impact

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The federal government partially shut down at 12:01 a.m. Eastern Time on Saturday, January 31, 2026, even though both parties had agreed on a deal to prevent it. The Senate passed a compromise package Friday evening by a 71-29 vote. But the House had already left town for the weekend, and won’t return until Monday to vote on the same measure.

This shutdown is narrower than the nightmare that ended two months ago—only about half of federal agencies lost their funding this time. But if you’re waiting for a tax refund, applying for an FHA mortgage, running a small business that needs an SBA loan, or you happen to be one of the federal employees who will work without pay starting Monday, the word “partial” offers little comfort.

The shutdown stems from a direct confrontation over how federal immigration agents conduct enforcement operations. Senate Democrats drew a line: no funding for the Department of Homeland Security without reforms to how ICE and Border Patrol operate.

The compromise gives DHS a two-week extension while negotiations continue. Everything else gets funded through September 30. The House is expected to vote Monday evening. If it passes, the shutdown ends, but DHS funding only extends two weeks—setting up another potential shutdown around February 14.

Agencies Losing Funding

The agencies losing funding include Defense, Homeland Security, State, Labor, Health and Human Services, Education, Transportation, Housing and Urban Development, and Treasury. Social Security, Medicare, and Medicaid continue because they’re funded automatically by law, not through annual appropriations. The FDA, EPA, and NASA also secured advance funding.

Tax Refunds Will Be Delayed

The IRS continues processing returns using prior-year funds and fee revenue, and electronic returns still get accepted. But processing slows because staff gets furloughed, and customer service disappears. If you’re counting on that refund to cover February rent or a car payment, you’re now waiting for the House to pass a bill Monday evening and hoping another shutdown doesn’t happen in two weeks.

FHA Mortgage Applications Stop

No new loan commitments get issued because the agency lacks appropriations. If you’re a first-time homebuyer relying on an FHA loan—which typically requires a lower down payment than conventional mortgages—your closing date became theoretical. Refinances stop too. If you locked in a rate and planned to close this week, you’re stuck.

The Small Business Administration faces the same problem. No new loans. No modifications to existing ones. Applications sit in limbo. For small businesses operating on thin margins, a delayed loan can mean missing payroll or canceling an expansion that would have created jobs.

Federal Workers Work Without Pay

Required employees report to work Monday knowing their next paycheck won’t arrive until Congress acts. Furloughed employees stay home, also without pay. A 2019 law guarantees they’ll get back pay once the shutdown ends and allows affected workers to collect unemployment benefits—which they’ll have to repay once they receive their retroactive federal paychecks.

Air traffic controllers, TSA agents, and Customs and Border Protection officers all fall into the “required” category. They’ll be at work Monday, managing air traffic and screening passengers and inspecting cargo, without paychecks. During past shutdowns, controller fatigue contributed to flight delays.

Federal Contractors Lose Income Permanently

Federal employees at least get back pay eventually. Contractors don’t. If your contract depends on new appropriations or modifications, work stops. Even if you’re on a fully funded contract, you might not be able to access federal facilities during the shutdown, forcing you to halt work anyway. The Government Accountability Office continues accepting complaints about contract awards, but good luck getting answers from the contracting officer who’s furloughed.

Immigration Services Slow Down

U.S. Citizenship and Immigration Services operates largely on fee revenue, so it continues processing applications. But support staff gets furloughed, slowing everything down. The Department of Labor’s immigration functions—including processing for temporary worker visa applications and checking that employers pay fair wages—shut down entirely.

This creates an absurd situation: employers trying to hire workers can’t verify employment authorization, and workers awaiting verification can’t start jobs. Meanwhile, the State Department can’t process routine passport applications or visa issuances, stranding Americans planning international travel and foreign workers seeking employment-based visas.

National Parks and Museums Close

National parks technically close during shutdowns, though some remain open with reduced services funded by states or park foundations. Federal museums and monuments close. If you planned a family trip to Washington, D.C., this weekend, you’re looking at locked doors.

What Continues Operating

Social Security checks arrive on schedule. The program is funded through payroll taxes and trust funds, not annual appropriations, so benefit payments continue. Same with Medicare and Medicaid. However, Social Security Administration offices operate with limited staff, so tasks like issuing new Social Security cards, processing benefit applications, and verifying work history for other programs face delays. The SSA confirmed that Supplemental Security Income payments scheduled for March 1 will be paid February 27 due to the calendar, and those payments should proceed despite the shutdown.

Veterans benefits continue because the VA received full-year funding. SNAP and WIC benefits flow uninterrupted. The FDA and EPA keep operating on advance appropriations, though routine food facility inspections and environmental monitoring may be curtailed.

Legal deadlines don’t get extended during shutdowns. If you’re a federal contractor with a bid protest deadline or a plaintiff with a filing requirement, you still have to meet it, even if the government is closed.

The Political Standoff Over Immigration Enforcement

Republicans initially argued that spending decisions and policy changes should be handled separately—fund the government first, then debate immigration enforcement reforms through separate legislation. But after the Minneapolis shootings, Democrats held firm. The House Freedom Caucus signaled before the Senate vote that it wouldn’t accept any modification to DHS funding separate from the larger spending package. So Monday’s vote is uncertain, even though both chambers and the White House agree on the compromise.

Economic Impact of Repeated Shutdowns

The Congressional Budget Office estimated the previous shutdown reduced the economy’s total production by 1.5 percentage points in the fourth quarter of 2025. Accounting firms calculated the overall economic cost at $11 billion in real GDP.

This partial shutdown, if it lasts only days as expected, wouldn’t cause as much damage. Economists like Mark Zandi at Moody’s Analytics say a brief partial shutdown would have minimal economic impact, though multiple weeks would do real harm.

But the cumulative effect of two major shutdowns in two months damages federal agencies and public trust in ways that numbers don’t capture. Federal employees have experienced significant stress and uncertainty. When agencies spend resources preparing for and recovering from shutdowns, they can’t get new policies or programs off the ground. In two weeks, we’re likely doing this again over DHS funding.

What Happens Monday

All federal employees who would normally report to work Monday are expected to do so to wrap up their work and prepare to leave, even if they’re subsequently furloughed. Citizens attempting to schedule passport appointments will encounter “closed due to government shutdown” notices. Small business owners checking on loan applications will find no one available to answer questions. Federal contractors trying to reach program managers will get voicemail.

The IRS will post official guidance about service disruptions. FHA will stop accepting new mortgage applications. The SBA will halt loan processing. Air traffic controllers, TSA agents, and Border Patrol officers will report to work knowing their next paycheck is theoretical. The American Federation of Government Employees has expressed concern about the shutdown’s impact on workers already experiencing strain from workforce reductions implemented earlier in 2025.

A vote is expected Monday evening. If the measure passes, the shutdown ends quickly—agencies can restore operations within hours for most functions, though processing backlogs will take longer to clear. If the vote fails, or if enough Republicans or Democrats defect to prevent the two-thirds majority, the shutdown continues. And the two-week clock on DHS funding starts ticking regardless, setting up another potential shutdown around February 14.

Structural Reform Needed

The Committee for a Responsible Federal Budget wants Congress to pass a law that would automatically keep government funded at the same spending level if Congress misses its deadline. The idea has bipartisan support but hasn’t been enacted. Without that kind of structural reform, shutdowns are used as a negotiating weapon, but they mainly hurt federal workers, citizens waiting for services, and contractors who never recover lost income.

Two shutdowns in two months. A third potentially coming in two weeks. For now, if you’re waiting for a tax refund, applying for an FHA mortgage, or running a small business that needs an SBA loan, you’re waiting on a vote Monday evening. And then, in two weeks, you’ll be waiting again.

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