Options for Pausing Private Student Loans During Coronavirus
Due to the Coronavirus pandemic, federal student loan borrowers can pause student loan payments for six months, interest-free. Private student loan borrowers aren’t able to get this same benefit.
Assistance programs during coronavirus vary by each lender, and not all lenders are making this information readily available. Here’s what we know about the current options for private student loan borrowers during the Coronavirus outbreak.
Options for Private Student Loan Borrowers
Private student loan debt tends to get less attention than federal debt. In 2019, the total amount of private student loan debt was $123.14 billion – that’s less than 10% of all student loan debt.
Unemployed or furloughed private loan borrowers face significant hurdles because there are fewer repayment, deferment and forbearance options compared with federal student loans. Thankfully, there are still viable alternatives for borrowers who can’t afford their private student loans.
If you are struggling to make student loan payments, the best thing to do is immediately call your specific student loan lender to see what they can offer you. Here’s what the most common private student loan companies are offering:
SoFi is currently offering borrowers up to 60 days of forbearance due to the economic crisis. Borrowers will have to fill out an online form to apply. It’s not clear if SoFi has any qualifications with this program.
SoFi also has a separate Unemployed Protection Program that applies to borrowers who have been laid off and haven’t missed a payment on their loan.
This is a three-month forbearance period, during which interest will still accrue on the loan. At the end of those three months, the borrower may renew the forbearance period or go back to making payments. There’s a 12-month limit on forbearance over the life of the loan.
Earnest offers two types of student loans. The first type is used by students or parents to pay for current tuition expenses. The second type is student loan refinancing.
If you refinanced student loans with Earnest, you may be eligible for up to 12 months of forbearance, during which time interest will still accrue. To qualify, you must have experienced some kind of economic hardship such as job loss, furlough, sudden medical expense, unpaid parental leave or some other qualifying event. Applicants must have their situation verified by Earnest.
Customers who used Earnest loans for undergraduate or graduate school are not eligible for forbearance, but can skip one payment within a 12-month period. This is only available to those who have made six consecutive payments on time, and interest will still accrue.
College Ave Student Loans
College Ave is offering a three-month forbearance program for borrowers. Interest will still accrue during this time. It’s unclear whether this program is available only for those with direct student loans, refinanced loans or both.
According to information from the National Association of Student Financial Aid Administrations,
Citizens Bank is offering a three-month forbearance period for private student loans. Borrowers should contact Citizens Bank at 1-866-259-3767 to sign up for this program. It’s unclear if interest will still accrue during this forbearance period.
Discover Student Loans
According to some responses from their official Twitter page, Discover is allowing student loan borrowers to defer their loans for two months, during which time interest will still accrue. Their website says they have a temporary interest reduction program and forbearance for those experiencing economic hardship.
Payments will be deferred until the national disaster is declared over by the federal government.
Interest will still accrue during this time, so it should only be used by borrowers who truly can’t afford their loans. This period won’t count toward the total amount of forbearance available to borrowers.
Borrowers who refinanced their student loans with CommonBond are eligible for 24 months of forbearance, while those who took out student loans are able to defer their loans on a case-by-case basis
Sallie Mae is allowing a 3-month payment pause upon request. You should contact them directly to see what your options are.
Refinance Private Loans
If you have private student loans with high interest rates, now is a good time to see if refinancing those loans will lead to a lower monthly payment. Having a lower payment allows for more flexibility in your budget, which can’t be underestimated during these uncertain times.
Keep in mind that refinancing federal student loans into a private student loan means a loss of federal student loan benefits. These include potential for student loan forgiveness, repayment plans based on your income, generous deferment options during times of unemployment or economic hardship and the ability to discharge student loans in death or disability.
If you choose a repayment plan with a longer term and reduced monthly payments, remember that this will increase the total interest paid over the life of the loan. If you choose this option but don’t experience the financial hardship you were expecting, keep making the same payments as before to avoid paying more interest than necessary. Compare refinance lenders to see who is right for you.
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