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Treasury Secretary Janet Yellen recently shared, in a letter to House Speaker Kevin McCarthy, that the Treasury Department estimates the federal government “will likely no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1.” Congressional leaders and the White House continue to seek agreement on a deal to lift the debt ceiling.

The United States has never defaulted on its debts. In all likelihood, lawmakers will continue their game of brinksmanship and will debate the terms of a legislative agreement to the latest possible moment. Additionally, the U.S. Treasury will continue to utilize various “extraordinary” measures to prevent reaching a position in which it is unable to make payments and honor debt within the constraints of the current debt limit.

Should this impasse go unresolved, it is possible the federal government will go into default—and will miss or delay payments on its financial obligations. There is no precedent or legally binding roadmap as to how or if the Treasury may choose which federal payments it will make under such a scenario.

At present, NACUBO recommends the following actions.

Review Treasury and Investment Policies

Treasurers should have a firm understanding of federal draw-down timing and practices. This is a good opportunity to review policies and consider scenario planning.

For many institutions, the largest federal drawdowns will occur when Department of Education Title IV and other federal aid (Department of Defense, Department of Veterans Affairs) funds are made available for the 2023-24 academic year. The debt ceiling impasse will likely have been resolved before August, sparing students and institutions from the impact.

However, business officers should consider other federal drawdown cycles and consider how a June impasse might impact payments stemming from other federal grants and contracts or federal payments related to academic health care and hospital entities.

NACUBO also recommends reviewing automated payment schedules to understand institutional obligations and to ensure there will be cash on hand should federal revenue become unpredictable.

It also is important to consider how interruptions in federal payments may disrupt your college and university stakeholders, even if they are not direct payments to your institution. For example, do you have a student population dependent on Post 9/11 GI Bill housing allowances, SNAP food assistance benefits, social security payments, or other federal assistance programs?

Examine Debt and Investment Portfolios

Business officers should understand the extent of institutional investment holdings in U.S. treasuries, including other products that may be invested in treasuries.

Institutions also should be positioned to have cash on hand to meet obligations in the event that principal or interest payments from their treasury investments are not paid as scheduled.

Furthermore, they should understand if those investments are needed for certain obligations (such as a debt service payment).

Know Your Reserve Policies

Business officers should familiarize themselves with institutional reserve balances and policies, as well as resource allocation management plans.

Additional Resources


Liz Clark

Vice President, Policy and Research


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