The COVID-19 pandemic is having significant impacts on financial institutions and their customers. Financial institutions are working hard to maintain operations as employees transition to working remotely while balancing the reality that some of their customers will stop making payments on their loans in the coming months. Borrowers with student loans are of particularly high risk due to surging debt levels and job losses, as demonstrated by the recordbreaking 6.6 million jobless claims filed in one week.
Financial institutions are in a unique position to provide relief to customers with student loans. The Coronavirus Aid, Relief, and Economic Security (CARES) Act mandates suspending all payments due for loans made under the Higher Education Act for six months, during which interest will not accrue. In addition, financial institutions can apply lessons learned from the 2008 Great Recession.
While the CARES Act focuses on federal student loans, this article discusses best practices that lenders and servicers in the private student lending industry could employ as they reexamine existing programs to improve customer experience while complying with existing and new regulatory obligations and investor requirements. What are key considerations to serving borrowers in this environment and beyond?
Global Pandemic Customer Care and Special Treatment Options
Financial institutions, including lenders and servicers in the private student lending industry, will have to navigate the changing needs of their borrowers by creating a response strategy that considers financial instrument characteristics, the customer experience, and applicable regulations. For example, some lenders are considering extending the length of rate locks for new loans.
Servicers can help customers navigate these difficult times through a variety of programs. Download the PDF to learn about six of the most effective relief options and related execution recommendations from our Guidehouse experts.