California borrowers get extra help with privately held student loans during COVID-19
Updated on May 11, 2020
Borrowers with student loans from private lenders are at a disadvantage when it comes to the Coronavirus Aid, Relief and Economic Security (CARES) Act. While the measure provides relief to those with federally-owned loans, the CARES Act does little to protect those with private student loan debt. While there are no federal measures in place to help borrowers with student loans owned by private lenders, those living in the state of California may benefit from new measures signed by Governor Gavin Newsom.
Relief for borrowers with private student loans
Governor Newsom recently signed an executive order that provides borrowers of some privately held student loans with relief from monthly payments for up to 90 days. 21 lenders agreed to work with the California governor to extend some of the same benefits that individuals with federally-owned loans now enjoy.
Under the executive order signed by Newsom:
– Participating lenders will not charge late fees for accounts where borrowers have expressed hardship due to the COVID-19 lockdown.
– Lenders will also provide a 90-day grace period during which time the borrower will not be reported to credit bureaus as in default.
– Billing will also be suspended during the 90-day period, which is an act that resembles the administrative forbearance that federal loans are under until the end of September.
Contrary to federally-owned student loans, which comply with the same set of rules, not all private lenders are required to cooperate with Governor Newsom’s executive order. It is best that borrowers living in California check with their lenders before assuming that the order applies to their situation. It is also important to note that this measure does not cross state lines. Those who do not legally reside in California cannot benefit.
What if you are not a California resident?
Even those who do not reside in California may be able to work out a payment plan that best reflects their financial situation during this unprecedented time. It is best to contact your private lender before your loan defaults and other action is taken to collect the debt. Many lenders offer forbearance and deferment during hardship. Communication, however, is the key to obtaining relief.