The CARES Act has brought no relief to those with private student loans

The private student loan market has been growing for a decade, and now, in an economy nearly frozen by the coronavirus pandemic, borrowers have few options for relief.

That’s one of the takeaways from a new one report by the Student Borrower Protection Center, a nonprofit founded last year by Seth Frotman, the former assistant director and ombudsman for student loans at the Consumer Financial Protection Bureau, after he protested the Trump- Administration resigned from federal agency lenders over borrowers.

The $ 130 billion private student loan market has grown more than 70% in the past 10 years and has recently outpaced the growth of auto loans, credit cards, and mortgages, the report said.

“These results should be a wake-up call that the real size of the student debt crisis is even worse than many think,” Frotman said.

“In the private student loan market, the weakest borrowers will be hardest hit.”

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The loans have been particularly detrimental to people of color, as black borrowers are four times as likely to be in arrears on repayments as their whites. Older people are also struggling with credit. More than 10% of private student loan borrowers over 55 years of age have balances in excess of $ 40,000, and more than half of private student loan co-signers are over 55 years of age.

In the midst of the pandemic, these senior borrowers can find themselves in a bind.

“They are trying to save for retirement or they may be retired and suddenly they are being billed for this private loan because the borrower is not paying,” said Betsy Mayotte, president of The Institute for Student Loan Advisors, a nonprofit organization that helps student loan borrowers with free advice and dispute resolution.

The private student loan market is largely unregulated, Frotman said. The CFPB receives more than 12 complaints about the loans every day.

“The private student loan market is like the wild west of consumer finance,” Frotman said. “It doesn’t require lenders to work with borrowers when they’re in trouble or even answer phone calls from borrowers if they have questions.”

The historic stimulus package that Congress passed in March to relieve the economy amid the global health crisis gave federal student loan borrowers a six-month grace period from their bills. But it offered no relief to those with personal student loans. That’s a problem, say proponents.

“In the last recession, private lenders often pushed struggling borrowers into default by turning down their demands for affordable repayment options,” Frotman said. “When the economy falters, borrowers with private loans can find themselves in dire straits unless lawmakers intervene and help.”

Many lenders who make private student loans face “significant restrictions on the type of relief they can offer,” Mayotte said. “If payments are not affordable, there are very few, if any, options.”

“The best advice is to just call when you have trouble and see what they can do to help,” she added.

A spokesman for the Consumer Bankers Association who a Number of private lenders, said: “Bank-issued personal loans are subject to the same requirements and supervision as any other bank-offered loan and have more disclosures.”

During the pandemic, some states, including California and Illinois, have asked private lenders to offer relief options to borrowers. The agreed break usually takes the form of a 90-day deferral, during which interest is still due.

If you’ve signed a private student loan for someone who’s gotten into financial difficulties, you’re on the hook for the bills, Mayotte said. However, once the borrower is financially back on their feet, you can see if they can refinance their loans to remove you as a co-signer or see if the lender has a co-signer release program, she said.

“If the co-signer is in a difficult financial situation, they can also seek financial relief from the lender, just as the main borrower should,” said Mark Kantrowitz, editor of SavingForCollege.com.

When Frotman worked for the Consumer Financial Protection Bureau, he said, “By far the main complaint against private student loan companies was from borrowers who struggled to get help when they couldn’t afford their payments.”

“If that was a problem then, it could be a mess now.”