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Calls for private loan support persist as lenders, states begin to act
There’s a new push to help distressed student loan borrowers whose education debt isn’t covered by government coronavirus relief, as private student loan companies – and the states in which they operate – begin to answer that call.
Most notably, a dozen senators — led by Democrats Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts — on Tuesday called on banks, servicers and online lenders to provide federal loan-like relief. In letters to 13 such lenders, the lawmakers pleaded them to:
- Pause payments “without fees or consequence” for borrowers and their cosigners
- Institute an interest rate freeze for delinquent borrowers
- Stop collection efforts and lawsuits for delinquent borrowers and those in default
- “Cancel or discharge as many delinquent loans as possible during this crisis,” particularly for borrowers who have filed for bankruptcy
- Provide additional repayment options that would “permanently” help borrowers, especially those with incomes affected long term, to afford their monthly payments
For their part, many private lenders and refinancing companies have announced coronavirus-related support in the form of forbearance and deferment. And Navient, one of the lenders addressed by the senators, told Yahoo Finance that it had stopped filing new lawsuits against borrowers in mid-March.
States also appear to be making headway. New York Gov. Andrew Cuomo announced Tuesday that he’d reached an agreement with student loan servicers operating in the state to award a three-month reprieve for about 300,000 local borrowers, although interest would accrue on qualifying borrowers’ debt while their repayment is paused.
Similarly (albeit less officially), Colorado Attorney General Phil Weiser last month urged loan servicers and collection agencies to halt collection efforts for residents affected by the failing economy.
Another congressional relief package could take the support a few steps further. Last month, there were similar calls for relief specific to federal loans:
March 19: In the Senate, Minority Leader Chuck Schumer (D-N.Y.), and former presidential candidate Warren (D-Mass.), among others, proposed a minimum of $10,000 of relief per borrower
March 23: In the House, Democratic Reps. Ayanna Pressley of Massachusetts and Ilhan Omar of Minnesota pitched the cancellation of at least $30,000 per borrower
How it affects YOU: Private student loan relief would be welcomed news for many borrowers, particularly if they were already delinquent or in default before the coronavirus pandemic struck. And, further, cancellation of delinquent student debt could be life-changing for borrowers. It’s currently unclear, however, if any of these legislative pleas and proposals will gain broad support.
We’ll be tracking pertinent developments for you. In the meantime, catch up with the latest via our coronavirus information center.
Also in the news …
Sen. Bernie Sanders (I-Vt.), a pioneer of the “free college” and mass student debt cancellation movements, ended his campaign for the Democratic presidential nomination on Wednesday, leaving former Vice President Joe Biden as the presumptive nominee. Sanders inspired Biden’s recent move to support tuition-free college for families with household incomes below $125,000. Compare higher education policy views with our pre-election primer.
There was a groundswell of online support this week for providing student loan relief to medical professionals who are on the front lines of battling the COVID-19 pandemic and risking their own health in the process. A pediatric resident authored a related HuffPost column.
The Better Business Bureau reported a phone call scam targeting student loan borrowers seeking relief in the wake of the COVID-19 crisis, according to multiple media reports. To protect yourself, review our guide on coronavirus student loan scams.
Reps. Josh Harder, D-Calif., and Brian Fitzpatrick, R-Pa., planned to introduce legislation this week that would allow 2020 graduates entering a tough job market to defer federal student loan payments for at least three years, according to The Modesto Bee. Current students are awaiting other forms of stimulus package relief, as we covered last week.
Federal loan servicer Nelnet announced late last week that it was rejected for a Department of Education contract to be part of the government’s new NextGen servicing platform, according to the Lincoln Journal Star.
Bloomberg Business reported that colleges and universities with healthy endowments are at risk.
Politico noted that higher education lobbyists are pressing Congress to be featured more prominently in the next potential stimulus package. Groups including the American Council on Education are seeking $46.6 billion in aid, while organizations representing research universities and medical schools asked for $26 billion in government assistance.
Last Friday, the current administration nominated Andrew A. De Mello to be the new inspector general of the Department of Education. De Mello works as a tax attorney for the Department of Justice.
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