Private Student Loans and the Ongoing Coronavirus Crisis

Six months ago, none of us would have imagined the world we live in today. We were free then, able to do what we wanted when we wanted.

 (photo credit: INGIMAGE)
(photo credit: INGIMAGE)
Six months ago, none of us would have imagined the world we live in today. We were free then, able to do what we wanted when we wanted. There were no lockdowns, no stay at home orders, and no social distancing. Life was normal and our choices were seemingly unlimited. No masks were needed and everything was humming along beautifully. Fast forward to today, and we live in a world with a vastly changed landscape. Colleges and universities are closed and learning is now on Zoom instead of in a classroom. The wonderful times with friends in dorms or in off-campus housing have come to a halt. Our economic future is uncertain, and many current students and recent graduates are trying to decide how to cope with debt and the on-going costs of paying for their education.

Private Student Loans

With the high cost of tuition and college expenses, many students find themselves needing to finance their education. Typically, after looking for scholarships and part-time employment, they first see what is available through federal programs. As is often the case, that funding is not sufficient to pay for all costs and fees so many people also take out student loans. These funds from credit unions, individual finance companies, and banks allow students to borrow beyond the federal limits. Since each loan is given by a private organization, the interest rates and terms of the promissory note vary by lending provider. The repayment contract is typically a level plan with the same payment toward principal and interest each month.

Special Relief Offered During the Coronavirus Crisis

If you are struggling financially because of a job loss or decrease in hours worked, the first thing you should do is to contact your servicer. You'll be able to explain your situation and concerns and ask about available assistance programs. If you know when you will be able to make full payments again, that is always helpful. While each company is different, many private lenders are offering Coronavirus disaster or emergency forbearance programs at this time. These typically allow you to pause your payments for a short time, often three months. Some lenders may also wave the late fees during this period. Because this forbearance is due to a national crisis, it usually will not count against the typical forbearance limit.

Refinance Your Private Student Loans

For recent graduates who still have a steady source of income, one way to lower monthly payments is to refinance existing student debt. With the economic crisis and government intervention in the financial markets, interest rates have dropped significantly. By refinancing what you currently owe you can often get a much better interest rate. It pays to do careful research and evaluate the best lenders and refinancing programs that are available to you. Lowering your interest rate will save you money on your monthly payment and may also save you tens of thousands in interest over the course of the repayment period. It's also worthwhile to see if your new lender offers better financial hardship programs than your existing lender, should you need them in the future.