Providing Debt Relief for Clients Throughout the State of New York

Private Student Loans and the Coronavirus

The Covid crisis has put millions of Americans in a serious financial crisis. Private student loans stand out as one of the biggest problems Americans face during this crisis and for the near future. Unlike federal student loans which have automatically deferred payments and interest during the crisis, private loans have not. Although some do have deferment programs for a number of months, interest still accrues and some of these banks will expect consumers to pay back the deferred months quickly. If these payments are not made then they will default the consumer causing the loan to go into collection and ultimately litigation. Litigation often leads to default judgments which lead to frozen bank accounts and wage garnishment. These student loans vary but are often close to or over $100,000 which means the interest and fees accrued on these loans allows them to accumulate indefinitely.

The big private student loan creditors such as Navient/Sallie Mae, National Collegiate Student Loan Trust, Wells Fargo, Discover and others must all be anticipating that millions of people will inevitably default on their loans due to serious financial and medical hardship caused by Covid. We believe that this gives consumers an opportunity to resolve many of these defaulted private loans for even less than what these banks would have previously accepted. Student loan creditors like Navient and National Collegiate Trust usually write defaulted debts off and then are willing to negotiate with consumers reducing the balance by 50%-65% or more.

We believe that the likelihood is that the Sallie Mae’s and NCSLT’s will be less likely to sue consumers as quickly because of the fees and risk of recovery involved. Instead, they should be more interested in settling these loans while reducing the balance even further due to the covid crisis as financial and medical hardship are usually factors that help reduce the balance in a settlement negotiation.