Personal Finance

For people with private student loans, little relief amid the pandemic

Key Points
  • The private student loan market has been growing faster than credit cards or mortgages. 
  • But its borrowers didn't get any relief in the historic stimulus package passed by Congress.

The private student loan market has been growing for a decade, and now, amid an economy on near lock-down from the coronavirus pandemic,  borrowers find themselves with few relief options.

That's one of the takeaways from a new report by the Student Borrower Protection Center, a nonprofit started last year by Seth Frotman, former assistant director and student loan ombudsman at the Consumer Financial Protection Bureau, after he resigned from the federal agency in protest of what he described as the Trump administration's favoring of predatory lenders over borrowers. 

The $130 billion private student loan market is up more than 70% over the last 10 years, and has recently outpaced the growth of auto loans, credit cards and mortgages, the report found.

"These findings should be a wake-up call that the true scope of the student debt crisis is even worse than many realize," Frotman said.

"In the private student loan market, the most vulnerable borrowers are going to be the hardest hit." 

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The loans have been particularly damaging to people of color, with black borrowers four times as likely as their white counterparts to fall behind in their repayment. Older people are also struggling with the loans. More than 10% of private student loan borrowers over the age of 55 have a balance above $40,000, and more than half of private student loan co-signers are older than 55.

Amid the pandemic, these older borrowers can find themselves in a bind. 

"They are trying to save for retirement or maybe are already retired and suddenly they are getting billed for this private loan because the borrower isn't paying," said Betsy Mayotte,  president of The Institute of Student Loan Advisors, a nonprofit that helps student loan borrowers with free advice and dispute resolution.

The private student loan market is largely unregulated, Frotman said. The CFPB receives more than 12 complaints each day about the loans. 

"The private student loan market is like the Wild West of consumer finance," Frotman said. "There is no requirement that lenders work with borrowers when they struggle, or even answer borrowers' phone calls when they have questions." 

The almighty 529 college savings account
The almighty 529 college savings account

The historic stimulus package Congress passed in March to bring relief to the economy amid the global health crisis granted federal student loan borrowers a six-month reprieve from their bills. Yet it didn't offer any relief to those with private student loans. That's a problem, advocates say. 

"In the last recession, private lenders often drove struggling borrowers into default by denying their requests for affordable repayment options," Frotman said. "When the economy falters, borrowers with private loans can be driven into distress unless lawmakers step in and help." 

Many lenders who issue private student loans face "significant restrictions as to what kind of relief they can offer," Mayotte said. "There's very few if any options available if the payments aren't affordable." 

"Best advice is to simply call if you are struggling and see what they can do to help you," she added. 

A spokesman for the Consumer Bankers Association, which represents a number of private loan lenders, said "private loans issued by banks are subject to the same requirements and oversight as any other bank-offered loan  and have more disclosures." 

If the co-signer is in a difficult financial situation, they can ask the lender for financial relief, too, just as the primary borrower should have.
Mark Kantrowitz
publisher of

During the pandemic, some states, including California and Illinois, have asked private lenders to provide relief options to borrowers. The agreed upon break usually comes in the form of a 90-day forbearance, during which interest still accrues. 

If you co-signed on a private student loan for someone who's run into payment difficulty, you'll be on the hook for the bills, Mayotte said. Once the borrower gets back on their feet financially, however, you can see if they can refinance their loans to get you removed as a co-signer, or check if the lender has a co-signer release program, she said. 

"If the co-signer is in a difficult financial situation, they can ask the lender for financial relief, too, just as the primary borrower should have," said Mark Kantrowitz, publisher of 

When Frotman worked at the Consumer Financial Protection Bureau, he said, "by far, the top complaint against private student loan companies was from borrowers struggling to get help when they couldn't afford their payments."

"If that was a problem then,"it could now become a calamity."