The Coronavirus Aid, Relief, and Economic Security (CARES) Act offered some key benefits to certain student loan borrowers, including a suspension of payments and interest, as well as other key relief actions.
Since the bill passed in March 2020, President Donald Trump and President Joe Biden have both extended the student loan provisions. President Biden also announced his intention to forgive $10,000 in student loan debt to those who qualify.
The problem is that both the bill and proposal exclude all private student loan borrowers and even some graduates with older federal student loans. If you have private student loans, you may be wondering if there’s any relief for you. Here’s what to know.
Where’s the private student loan relief?
You may be wondering, why aren’t private student loans paused or being forgiven? The key is that the federal government can only provide relief to its own borrowers. While federal loans are serviced by private companies, most of the debt is actually owned by the U.S. Department of Education.
So if you have federal student loans that aren’t held by a private company, you qualify for the payment pause, interest and collection suspension and potential student loan forgiveness.
Unfortunately, though, there’s no option for private student loan forgiveness.
When the coronavirus pandemic first began, many private lenders offered relief of their own in the form of special forbearance. However, not all lenders have continued this despite the federal government extending its own relief to federal loan borrowers.
What you can do about private student loan repayment
If you’re still struggling with the effects of the coronavirus pandemic, your private lender may still be able to help you. Many private student loan companies offer forbearance on top of the emergency forbearance they provided at the beginning of the pandemic.
The caveat is that forbearance terms can vary from lender to lender, so you’ll need to contact them directly to find out what your options are.
Depending on your situation, you may also try to get on a modified repayment plan with your lender. This isn’t the same as an income-driven repayment plan offered by the federal government. But it may provide some flexibility with your monthly payments as you get back on your feet financially.
The final option is to consider refinancing your student loans with a different lender.
Why refinance private student loans
Private student loan refinancing can be a good option if you’re having a hard time making your current payments. That’s especially the case if you’re trying to figure out how to lower student loan payments or how to lower student loan interest.
Here are some of the benefits you may be able to take advantage of:
- Lower interest rates: The pandemic has caused several issues with the U.S. economy, but it’s also lowered interest rates to record lows. If you qualify for private student loan refinancing, you may be able to get a much lower interest rate than what you’re currently paying, which can save you money and lower your payment amount.
- Payment flexibility: Student loan refinance companies offer repayment terms ranging from 5 to 25 years, depending on the lender. If you can’t afford your current payments, refinancing may allow you to extend your repayment term and get a much more affordable payment. Unfortunately, that also means you’ll end up paying more interest over time. But you can also decide to refinance again or make extra payments once you’re financially stable again.
- Choice of lender: Each lender has had its own approach to student loan relief during the pandemic. If you can find a lender that offers better benefits for people who are struggling, such as unemployment protection or longer forbearance periods, refinancing can allow you to get those benefits for yourself.
Of course, private student loan refinancing isn’t for everyone. If you currently don’t have income or your credit score is in poor shape, you’ll have a tough time getting approved without a creditworthy cosigner.
Also, depending on your financial and credit situation and your current rates, you may not be able to get a lower rate than what you already have. As such, it’s important to take the time to shop around and compare rates and features from several lenders.
The 2 Best Companies to Refinance Student Loans
Our Top-Rated Picks for 2024 Offer Low Rates and No Fees
How to refinance private student loans
Private student loan refinancing is a relatively simple process. You’ll start by getting prequalified with several lenders, so you can compare rates, repayment terms and other features that are important to you.
The prequalification process typically only requires a soft credit check, so it won’t hurt your credit score. But going through that process with several different lenders can take time. To save yourself some time, consider using the Purefy Compare Rates tool.
This service allows you to get prequalified with multiple lenders at once and compare their offers side by side with just one submission of your personal information.
As you compare your options, make sure you consider each lender holistically. If you focus on just the interest rate or repayment schedule, you may miss out on other benefits that can make your life a little easier.
The bottom line
As a private student loan borrower, you don’t qualify for the federal student loan relief program through the federal government. You also won’t be able to take advantage of student loan forgiveness programs.
But that doesn’t mean you’re completely out of options. Start by speaking with your lender to see if there’s anything you can do to get a forbearance or at least a modified payment plan to stay current on your loans — if you miss a payment by 30 days or more, it could wreck your credit score.
Also, consider student loan refinancing as a way to get the relief you need. There are several benefits to refinancing that could make your payments more affordable and loan repayment plan more effective, at least until you get back on the right track.
Make sure you consider all of your options thoroughly before you make the right choice for you.
