Private Student Loan Lenders Play a Waiting Game
NEW YORK ( MainStreet) While nearly all Department of Education staffers are home cooling their heels and waiting to return to work, private lenders of student loans are beginning to plan for a government shutdown of unknown duration, when furloughed federal workers with student loans face the prospect of missing their first paychecks and, potentially, a loan payment.
These lenders also seemed to be playing it close to the vest when it came to specific responses and are looking to see how the situation pans out. Sallie Mae, the largest private student loan lender, seemed to be betting on a short shutdown as its emphasized its willingness to do fixes of a limited duration.
"There are a number of options already available to assist individuals experiencing short-term financial difficulty with their student loan payments, including income-based repayment on federal loans," said Sallie Mae spokesperson Nikki Lavoie. "As always, we work with our customers one-on-one to understand the nature of their financial circumstances and identify the best option for them." Income-based repayments are not available to people with Sallie Mae loans--although they are for federally guaranteed loans FFELP loans Sallie Mae services. FFELP loans were eliminated in 2010 by the Health Care Education and Reconciliation Act.
"Sallie Mae's student loan servicing remains available, as normal, during the government closure," Lavoie said. "Our call center hours remain the same, and our website is processing payments 24/7."
Wells Fargo, one of the last of the bank lenders along with JP Morgan Chase and PNC Bank, took an anything-goes approach. "We understand that the uncertainty regarding the government shutdown may make this a stressful time for our customers," said Jason Vasquez, a spokesperson for Wells Fargo Consumer Lending. "There are too many unknowns right now to know the full impact of the government shutdown and we will work with any customers experiencing impacts on a case-by-case basis and encourage customers with questions to contact us."
This is not an area where states can step in and do what the federal government can't. Mark Kantrowitz, senior vice president and publisher of Edvisors Network, pointed out that there aren't any relevant state programs to help people who have been furloughed.
Still, on the federal loan front, an unintended consequence may be that the government shutdown and the disruption of paychecks for federal workers may lead borrowers to discover existing work-arounds--income based repayment, for example.
"Federal student loan customers may be eligible for income-driven repayment programs which can cap monthly payments at 10 to 15 percent of discretionary income, said Debby Hohler of Upromise, the college saving program which is a division of Sallie Mae.
Even if 94% of the Department of Education staff is furloughed, the remaining 6% includes ED's collection arm, the Default Resolution group. As Joshua Cohen wrote in a Student Loan Lawyer blog, "Not only did they answer my call, but I was also surprised when told that the shutdown doesn't affect them at all."