As pandemic crushes the young, all student loan rescue efforts should be created equal
Eight million private sector borrowers were excluded from the federal stimulus package that provides relief for crushing student loan debt.
Say you’re a recent college graduate, working as a barista and driving for Uber while looking for a career in your chosen field.
You’re managing to make ends meet, but now the coronavirus pandemic hits. The coffee shop shuts down. Uber customers stop calling. You’re not thrilled about picking up fares anyway because anybody could expose you to the virus.
Meanwhile, forget about that career for now. The economy is virtually at a standstill.
Everything’s upside down except your bills — including a monthly student loan payment — which never go away.
You could use a break from that student loan payment, and if you took out a federal loan, you’ll get one. As part of the $2 trillion coronavirus stimulus package passed by Congress, borrowers of federal student loans can suspend their payments through Sept. 30, with no additional interest and no harm to their credit rating.
But if you borrowed for school through a private lender — which was the case for some 8 million to 9 million Americans who have outstanding student loans — you’re out of luck. There’s no help coming to you from Washington.
And that is simply not fair.
Treat private loans the same
Here’s what we believe should happen:
As outlined in a March 27 letter signed by 11 Democratic senators and one independent — Bernie Sanders — and sent to dozens of major student loan lenders, required payments on student loans from private lenders should be suspended without penalties, just as the stimulus package allowed the suspension of payments on federal loans. Collection efforts, including lawsuits, should be suspended. The delinquent loans of borrowers in severe financial straits, such as bankruptcy, should be canceled. And borrowers should be offered more lenient repayment options over the long term.
If this proposal — spearheaded by Senators Dick Durbin of Illinois, Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio — goes nowhere with private lenders, Congress should step in. It should make things fair and equal, granting borrowers of private student loans the same relief as those who have federal loans.
Younger workers, who overwhelmingly account for the 1 in 5 Americans who have student loan debt, have been among the hardest hit by the pandemic. Almost a third of workers ages 18 to 34 have lost their jobs, compared to 15 to 22 percent of workers 35 and over, according to a Harris survey in late March. And, for that matter, holders of student loans from private lenders owe more, on average, than holders of federal loans.
Student loan crisis grows worse
Long before anybody ever heard of COVID-19, there was a very real student loan crisis in our country, threatening to hobble the lifelong prospects of a generation of young Americans.
Even before the pandemic, the aggregated amount of student loan debt had risen to $1.6 trillion. In a way that their parents, who grew up in a time of more affordable higher education, never had to grapple with, young Americans have had to wait longer to start families and buy homes.
In previous editorials, we have called for forgiving some student loans, expanding Pell Grants, providing free tuition, spending more on workforce training and increasing spending on historically black colleges and universities and minority-serving institutions.
Bad loans from the start
Private market student loans often are problematic to begin with.
Private lenders don’t offer the same protections offered by the federal government. If your loan is from, say, Wells Fargo or Navient, there’s no provision for loan forgiveness, for example, if you choose to work in the public sector after graduation. And flexible repayment plans are typically nonexistent.
Private lenders have a record of jumping on collection action immediately when borrowers miss a few payments, even in hard times — like now.
“We’re seeing them take borrowers to court, even during this pandemic,” Moira Vahey, of the Student Borrower Protection Center, told us. “And dragging people into court now is a public health as well as a predatory issue.”
Our nation’s student loan crisis has just grown worse, as young people by the tens of millions are thrown out of work because of the pandemic. We should at least insist that federal efforts to come to the rescue treat all student loans — government-backed or private — the same.
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