How states are helping private student loan borrowers during coronavirus

Private student loan borrowers not covered by the CARES Act may still be able to get help with managing loan payments. (iStock)

The COVID-19 pandemic has made keeping up with student loan payments challenging for many borrowers. The federal CARES Act provides financial relief from student loan debt, including short-term forbearance and a reduction in interest rates, but only for federal loan borrowers. 

If you have private student loans, you may be feeling left out in the cold. But help is not entirely out of reach. A number of private lenders and loan servicers have reached agreements with individual states to offer help with loan payments for private student loan borrowers. 

Plus, there's always the option of refinancing — which can reduce your monthly payments and ease your financial burden. Use this free online tool to see if you're eligible for a better interest rate and compare student loan refinancing options from multiple lenders without affecting your credit score.


Here's everything else you need to know about what states are offering if you're struggling with private student loans

What states are doing to help private student loan borrowers

The coronavirus student relief options being offered at the state level are similar to what the CARES Act is doing for those with federal student loans. As part of an agreement between nine states and the District of Columbia, private lenders and loan servicers in those states are offering loan borrowers the following:

  • Temporary forbearance of loan payments for 90 days.
  • Late fee waivers.
  • No negative credit reporting.
  • A temporary pause in debt-collection lawsuits.
  • Help with enrolling in debt assistance programs.


Along with Washington D.C., the states that are part of this agreement include California, Colorado, Connecticut, Illinois, Massachusetts, New Jersey, Vermont, Virginia and Washington State. The benefits being offered to those with private student loans and commercially held Federal Family Education Loans (FFEL) mirror a program that was implemented earlier in the state of New York. 

Other options available to private student loan borrowers

Getting relief for private student loans during coronavirus at the state level hinges on two things: which state you reside in and whether your loan servicer or lender is participating in the relief efforts. 

If you don't live in an eligible state or you do but your lender or loan servicer has declined to enter into the agreement, you'll need to consider other ways to manage loan payments for private student loans. Your options include:

  • Refinance student loan debt. Refinancing private student loans means taking out a new loan to pay off your existing loans. Doing so could make your loan payments more manageable while saving you money if you're able to secure a lower interest rate. With interest rates near record lows, it could be an ideal time to refinance student loans if you're able to qualify for the best rates. 
  • Use stimulus funds to pay your loans. If you received a stimulus check under the CARES Act, you could use that money to make one or more payments toward your loans. That can help you avoid falling behind on your payments in the near-term.  
  • Ask about deferment or forbearance. Even if your lender isn't part of a state-sponsored agreement, you may still be able to pause payments temporarily. Deferment and forbearance programs can offer a temporary respite from making student loan payments if you're experiencing a coronavirus-related financial hardship. Just keep in mind that either one could increase your student loan debt if interest accrues on your balance during the time you've paused payments. 
  • Look into flexible payments. If your lender doesn't offer deferment or forbearance, you may still be able to negotiate different terms for your loan payments, temporarily. For instance, you may be able to have your payment reduced or make interest-only payments until your financial situation improves. 

If you think it makes the most sense to refinance student loan debt, remember that your credit score can influence the interest rates you qualify for. 


How to tap into state relief for private student loans

Since the agreement surrounding private student loans is limited in terms of the states covered and lenders participating, it's best to reach out to your loan servicer or lender directly to determine what type of help is available. 

Your lender should be able to tell you whether it's participating in the program and, if so, what the next steps are for getting relief from loan payments. In some instances, for example, you may need to do nothing if your loan servicer automatically puts loans into forbearance and suspends payments. 


If your lender requires you to apply for relief, ask how to do that and what type of supporting documentation may be necessary, if any. For example, you may need to show proof of unemployment or a pay stub showing reduced hours to prove financial hardship. 

Once your lender or loan servicer has placed loan payments in forbearance or deferment, be sure to read the fine print. Specifically, make sure you understand what fees you'll pay (if any), how interest will accrue while you pause payments and when you're expected to resume loan repayment. That can help you avoid any surprises once a forbearance period ends and it's time to tackle your loans again.