Advocates Urge Industry to Provide Relief to Private Student Loan Borrowers During COVID-19
Millions of Private Student Loan Borrowers Cut Out of the Emergency Stimulus Relief Lack Basic Tools to Navigate the Economic Crisis
March 27, 2020 | WASHINGTON, DC — Today the Student Borrower Protection Center (SBPC) and Americans for Financial Reform (AFR) sent letters to one dozen large private student lenders urging the companies to take steps to mitigate borrower harm caused by the economic fallout of the coronavirus. Private student loan borrowers were not provided any relief by Washington’s emergency economic stimulus legislation. In light of this critical omission, and given the widespread financial impact of COVID-19, advocates are urging the largest student lenders to act quickly to protect borrowers.
Today’s letters call on the private student loan industry to ensure that borrowers do not bear the brunt of economic disruptions caused by the coronavirus. Specifically, advocates are calling for companies to waive certain fees and penalties; allow borrowers to cease payments for a period of time; halt collections, including in the courts; and provide some loan modification options. These measures are similar to the relief consumers are already being provided in some other consumer financial markets.
Letters from SBPC Executive Director Seth Frotman and AFR Senior Policy Analyst Alexis Goldstein were sent today to CEOs and senior executive officers at Wells Fargo, Sallie Mae, Navient, Citizens Financial Group, Discover Financial Services, PNC, Truist, the Pennsylvania Higher Education Assistance Agency, the Higher Education Loan Authority of the State of Missouri, Sofi, LendKey, and College Avenue Student Loans.
Today’s action is part of a broader effort to combat predatory practices and hold industry accountable for providing critical relief during this economic crisis.
The letters are available here:Final-PSL-lender-letters
The Private Student Loan Market
The private student loan market consists of almost $130 billion in debt owed by millions of borrowers across the United States. Private student loans are larger than the payday market and similar in size to the personal consumer loan market.
Private student loans generally lack the crucial protections offered to federal loan borrowers, including flexible repayment plans, expanded forbearance options, and the rights to periods of loan deferment. As a result, private student loan borrowers can experience serious problems accessing affordable repayment options or other repayment alternatives to avoid default. Furthermore, private student loans are disproportionately used by students attending for-profit schools that have a history of targeting vulnerable students.
Even before the outbreak of the coronavirus pandemic, private student loans made up a disproportionate share of recent student loan complaints relative to their share of the actual student loan market, according to the Consumer Financial Protection Bureau (CFPB). Ninety percent of complaints from private student loan borrowers to the CFPB are concerning struggles to afford monthly payments or poor customer service from their lenders and servicers.