While efforts from the federal government and lawmakers to support student loan borrowers during the COVID-19 outbreak have focused on federally-held loans, some student advocacy groups are pushing for relief for private student loan borrowers, and a handful of private education loan lenders are offering to delay borrowers’ payments.
Earlier this month, President Donald Trump announced that he would waive the interest accrual on federal student loans — though many outstanding questions remain as to how much relief borrowers will truly experience, despite some recent clarity from the Department of Education (ED). Regardless, Trump’s plans do not carry over to private loan borrowers, who don’t have the same safety nets federal borrowers do to manage monthly payments in financial distress, such as enrolling in an income-driven repayment (IDR) plan.
But the government's hands are not exactly tied, according to Robyn Smith, an attorney with the National Consumer Law Center (NCLC), who said the federal government and Consumer Financial Protection Bureau (CFPB) do have some authority to mandate relief for private borrowers.
“There are definitely powers that executive agencies have, as well as Congress, to do something about the situation,” Smith said. “I think CFPB and each of the regulators can certainly take action.”
In fact, the American Federation of Teachers, one of the nation’s largest teachers unions, and the Student Borrower Protection Center, a group founded by former CFPB student loan ombudsman Seth Frotman, wrote a letter to CFPB last week urging it to strengthen its oversight over private student loan companies in light of the new coronavirus, and to “examine the full breadth of these companies’ operations — including the servicing of loans owned by [the Department of Education (ED)].”
“[P]ublic health and economic disruptions will pose unique problems for student loan borrowers and will acutely stress the student loan market that you are responsible for overseeing,” the groups wrote to CFPB Director Kathleen Kraninger. “Absent rigorous oversight from [CFPB], student loan borrowers will be forced to bear the brunt of this turmoil.”
The groups specifically recommended CFPB seek an executive order from a judge to declare it has the authority to oversee private servicers, arguing that if ED “continues to challenge [CFPB’s] exercise of its supervisory authority, the stakes are simply too high for [CFPB] to back down.”
“With student loan delinquency rates in the double digits and another borrower defaulting on a federal student loan every 26 seconds, the student debt crisis is already dire. However, taken together, the steps described above will ensure that millions of student loan borrowers are not made even more vulnerable by the impacts of the coronavirus,” the groups wrote.
In lieu of action from the federal government, however, Smith said that “right now, it’s really just up to the lenders” to assist struggling borrowers.
A handful of private education lenders have been offering students extended payments and other types of assistance during the COVID-19 outbreak, though none have proactively reached out to borrowers to make them aware of those options.
For example, on the top of Discover’s website there is a banner directing borrowers to contact the lender via its mobile app or phone if they have been impacted by the virus. And borrowers on Twitter report that Discover has offered them two-month interest-free forbearance when they reached out. Additionally, Discover responded to a customer on Twitter who asked for help that it was offering extended payments to qualified borrowers.
“We’re encouraging student loan borrowers to contact us directly if they’ve been impacted by COVID-19 as each situation is unique,” Robert Weiss, the senior manager of public relations at Discover, told NASFAA. “We will be extending relief to qualified customers who are experiencing financial difficulty caused by the spread of COVID-19.”
Another borrower tweeted that Sallie Mae is “letting people suspend payments and your loan will stay in good standing,” and urged others to contact the lender for similar support. Rick Castellano, the vice president of corporate communications at Sallie Mae, said in an email to NASFAA that impacted students should contact Sallie Mae via its website or by phone to discuss their situations, and confirmed it will help borrowers suspend monthly payments while keeping their account in good standing.
Rory Sheehan, the vice president of media relations for Citizens Bank, said the lender encourages borrowers to call for help, and disclosed to NASFAA that it is offering a three-month forbearance that will not count against borrowers’ lifetime forbearance limits, and that it is waiving late fees.
In addition to support from private education loan lenders, New York is taking a stab at providing some form of relief for its private student borrowers. On Tuesday, New York Attorney General Letitia James tweeted that she would be “temporarily halting the collection of state medical & student debt owed to [New York State] that was referred to my office."
“In this time of crisis,” she continued, “I won't add undue stress or saddle NYers with unnecessary financial burden, this is the time to support residents.”
The policy — which will also automatically suspend accruing interest on those student loans referred to the attorney general's office for collection — as it pertains to student loans, however, only applies to those who “owe student loan debt to State University of New York campuses,” according to a press release.
Plus, Colorado Attorney General Phil Weiser recently released a statement in which he encouraged student loan servicers to cease their debt collection efforts.
“Moreover, to the extent that such providers can work proactively with borrowers to help them best manage their situation, they will join other businesses taking responsible and compassionate efforts to lessen the impact of this crisis,” he added. "My office is looking for ways to help Coloradans affected by this crisis. We encourage financial institutions to act responsibly and compassionately."
NASFAA created a web center to keep members and the financial aid community updated on pertinent news related to the coronavirus. Stay tuned to Today’s News and NASFAA’s AskRegs for more news.
Publication Date: 3/24/2020