When Congress passed the $2.2 trillion emergency economic legislation in late March, it provided relief for student loan borrowers of federal loans only. Borrowers with private loans were excluded, but help may be on the way.
Gov. Andrew Cuomo of New York has announced an agreement with the largest loan servicers in New York state to provide relief to 300,000 private student loan borrowers who are state residents. And several members of the Senate Banking and Senate Health, Education Labor and Pensions committees, led by Elizabeth Warren, D-Mass., and Sherrod Brown, D-Ohio, are advocating for even broader relief for private student loan borrowers nationwide.
The New York State Department of Financial Services reached agreements with Navient, Nelnet, PHEAA, MOHELA and other private student loan servicers to defer payment collections for 90 days, waive late fees and refrain from reporting negative data to credit bureau agencies. Servicers also agreed to cease debt collection lawsuits for 90 days and work with eligible borrowers to enroll them in other applicable borrower assistance programs, according to the DFS. Student loan borrowers are advised to contact their student loan servicer to obtain this relief.
“At a time where many are suffering financial hardship due to COVID-19 it is imperative that all regulated industries work with consumers to provide relief,” Linda A. Lacewell, superintendent of the state’s Department of Financial Services, said in a statement. “We appreciate the largest student loan servicers and lenders in New York and the nation stepping forward with a thoughtful plan to help New York student loan borrowers.”
Meanwhile, Sens. Warren and Brown along with 10 other Democratic senators, including Bernie Sanders, D-Vt., and Amy Klobuchar, D-Minn., have written to leading servicers of private student loans, including Wells Fargo, Navient and Sallie Mae, asking them to provide immediate relief to private student loan borrowers. They want those companies to provide essentially the same relief that federal student loan borrowers were given in the recently passed CARES Act (short for Coronavirus Aid, Relief and Economic Security). That relief includes a six-month suspension of payments for federal student loans, with no interest charged.
More specifically, the senators are asking those companies to suspend loan payments without fees or consequence, ensure that payment suspensions don’t trigger consequences for co-signers of loans and halt all all involuntary collection efforts. They’re also asking that loans of distressed borrowers be canceled or discharged and loan modifications and affordable repayment options be expanded.
“We will continue to fight for legislation that includes aggressive policies such as broad debt cancellation for all student loan borrowers … We, however, believe that your company also has a responsibility to do more during the COVID-19 crisis,” the senators wrote.
Warren, Brown and Sens. Dick Durbin, D-Ill., and Richard Blumenthal, D-Conn., have also asked the U.S. Department of Education to focus the $14 billion emergency relief funds for students and colleges and universities included in the CARES Act on public and not-for-profit institutions. If the DOE expects relief will also be available to for-profit colleges, the senators want the department to adopt policies that will prevent those colleges from using funding for anything other than direct student aid.
— Check out 8 Ways the Stimulus Package Helps Student Loan Borrowers on ThinkAdvisor.