Many federal student-loan borrowers got some welcome relief in March, thanks to federal legislation passed in response to the coronavirus pandemic.
But what about students who borrowed from private lenders? For them, it’s a much muddier picture.
The federal economic-relief package known as the Cares Act allows many federal student-loan borrowers to skip payments until October without accruing interest. The law, however, doesn’t apply to private loans and Federal Family Education Loans held by private lenders such as commercial banks.
As a result, many private lenders are offering pandemic-related relief. However, the offers vary and generally aren’t as extensive as what is available under the federal law. About 70% of private loan-holders who requested relief directly from their lenders have received it, according to a recent poll of more than 1,000 borrowers by LendingTree’s Student Loan Hero division. Many borrowers don’t realize assistance may be available, however, and don’t call their servicer to seek help.
If you don’t know who your private-loan servicer is, check the contact information on your monthly billing statement. Visit the servicer’s or lender’s website for information about pandemic relief, or contact the lender directly to see what kind of help, if any, is available.
Borrowers should understand the terms of any relief offer before taking it, says Adam S. Minsky, a Boston lawyer focused on student debt. Among the questions to ask: How long is a forbearance available, and will interest accrue during that period? Will interest be capitalized, or added to the unpaid principal at the end of the forbearance period? Will the loan’s length change, and will subsequent payments be higher?
Mr. Minsky also advises borrowers to check back with the servicer before the end of any forbearance period to see what other options, if any, are available if the hardship persists.
Here is a sampling of what some private lenders are offering to give a sense of the kind of deals available.
Ascent Funding LLC: Borrowers can apply for a forbearance of up to three months and it won’t count toward their 24-month forbearance limit. Ascent also has extended the grace period between when a borrower graduates or drops below half-time and has to start making payments to nine months from six months for undergraduate loans.
The grace periods for graduate loans depends on the degree program, but range from nine months to 36 months.
Bank of North Dakota: Payments can be deferred for six months with no impact on the borrower’s credit rating. Interest will continue to accrue and could increase the monthly payment in the future. The variable interest rate on loans was reduced on April 1 to 2.34% from 3.40%. The fixed rate on all student loans disbursed before April 1, 2020, will drop by 1 percentage point after the bank migrates to a new servicing system later this summer.
Citizens Bank: Borrowers can request a special three-month forbearance, with an option to extend it another three months. There are no restrictions on eligibility, and the program won’t count toward a borrower’s lifetime forbearance limit. Additionally, the bank has waived late fees for all customers, paused wage garnishment and launched a loan-modification program where borrowers can apply for additional relief for one year.
College Ave Student Loans: Payments can be suspended for three consecutive months under the company’s disaster forbearance program. The lender will work with customers who are experiencing extended hardship on a case-by-case basis. Options could include additional forbearance or revised repayment plans, among others.
CommonBond: The company is offering special forbearance protection that will last for as long as a borrower needs it while the national emergency is in effect. Interest will still accrue during this forbearance period, but won’t be capitalized. Late fees are being waived during the pandemic. After the national emergency ends, borrowers still struggling financially can suspend monthly payments for up to 24 months using CommonBond’s standard forbearance program; under this program interest will accrue and be capitalized.
EDvestinU: Borrowers struggling to make payments should call their servicer, Granite State Management & Resources, for guidance as to what options may be appropriate for their situation. Generally borrowers facing pandemic-related hardships are eligible for up to 12 months of no payments, in three-month increments. Interest will accrue during this period, but it won’t be capitalized for hardship relief granted from April 17 through at least Sept. 30. Late fees won’t be applied either.
Earnest: Borrowers who sought help on or before June 30 were eligible for a deferment of up to 90 days. Starting July 1, Earnest will grant forbearance requests of up to 30 days and re-evaluate the program on a 30-day basis. The short-term forbearance won’t count toward the borrower’s lifetime limit. Interest will continue to accrue during this time but it won’t be capitalized. Borrowers also may be able to make interest-only payments for a short time.
Minnesota Office of Higher Education: All SELF and SELF Refi Loans have a 0% rate from March 13 through Sept. 30. No action is needed to obtain this rate. New loans will have the temporary 0% rate through Sept. 30 and will return to posted rates on Oct. 1. In addition, special six-month Covid-19 forbearances are available upon request for SELF and SELF Refi Loans serviced by Firstmark Services. Requests must be made by Sept. 30. These forbearances aren’t available for loans with first disbursement dates after June 30, 2020.
Navient Solutions LLC: Qualified borrowers who requested help before July 1 were eligible for up to three months of administrative forbearance, which doesn’t count toward their lifetime forbearance limit. Beginning July 1, qualified borrowers who request it can receive forbearance of at least a month, which also won’t count toward their lifetime limit. Interest will continue to accrue during the forbearance period, but it won’t be capitalized. In addition, Navient offers a temporary rate-reduction program that reduces the interest rate and lowers the monthly payment amount for eligible borrowers facing pandemic-related or other hardships. Interest-only repayment or extended repayment, which lowers a borrower’s monthly payments, but extends the life of the loan, also may be available.
Rhode Island Student Loan Authority: Borrowers with nonfederal education loans can suspend monthly loan payments for up to three months with an online request. Borrowers who think they will need additional flexibility after three months should call about a week before the forbearance ends to see what options may be available, says Noel Simpson, deputy director of Rhode Island Student Loan Authority. The authority offers income-based repayment, which might be appropriate for borrowers experiencing a longer-term problem, he says.
Sallie Mae (SLM): Borrowers with a Covid-19-related hardship can request a three-month suspension of payments; interest accrues during this time but won’t be capitalized. There are no fees, no impact to the credit standing of customers or cosigners, and no collection efforts while the account is in forbearance. Those with a more severe and/or longer-term hardship can request loan-modification programs, such as a temporary interest-rate reduction or extending their loan term. There also is an interest-only payment option for borrowers who can demonstrate financial difficulty.
Sofi: Student-loan borrowers affected by the pandemic generally can get 60 days of forbearance, with the option to extend it for another 30 days. Borrowers need to call again to request the additional month.
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