These private student loan companies got P3 loans – will they be forgiven while borrowers struggle?
A new report released this week found that several private student loan companies have received substantial federal financial assistance and low-interest loans as part of pandemic relief programs. Some loans could eventually be canceled – a benefit that is currently not extended to private student loan borrowers.
The Center for the Protection of Student Borrowers (SBPC) find as several private student loan companies such as CommonBond, LendKey and Upstart has received hundreds of thousands of dollars from the Paycheck Protection Program (PPP). The PPP program was enacted by the CARES Act last year to provide economic relief to struggling businesses in the form of forgivable loans to cover payroll and other selected operating expenses.
SBPC discovered that other private student loan companies were receiving funds through Term Asset Backed Securities Lending Facility (TALF), a loan program put in place in response to the pandemic to keep credit markets afloat. Under the TALF, the federal government provides funding to support the purchase of “asset-backed securities,” which are pools of loans and other consumer debt, including private student loans. Student loan giants like Navigate and SoFi would have benefited from this program.
In addition to providing financial relief to businesses, the CARES Act suspended payments, interest, and collections on federal student loans held by the government – relief that has since been extended until September 30, 2021 by the Biden administration. But private student loan borrowers have been excluded from this relief. And even before the enactment of the CARES Act, private student loans were already excluded from federal student loan programs, such as income-tested and loan forgiveness.
The SBPC estimated that private student loan companies may have received up to $ 300 million in economic aid related to the pandemic. The authors of the report noted the irony of providing hundreds of millions of dollars in financial assistance and forgivable loans to private student loan companies, while private student loan borrowers continue to struggle.
“If even a dollar of PPP loans to student lenders were to be forgiven – because these loans are meant to be as part of the design of the program – this dollar will represent more relief than borrowers received on their private student loans throughout the coronavirus crisis, ”the SBPC said.
House Democrats included $ 10,000 in private student loan forgiveness for struggling borrowers in a massive stimulus bill last year. While the legislation passed the House, it ended up nowhere in the Republican-controlled Senate. With Democrats now in control of the House, Senate and White House, it is not clear whether the private student loan cancellation will be reconsidered. No student loan waivers have been included in President Biden’s recent stimulus proposal, although he has indicated he will push Congress to pass student loan relief through separate legislation.