The COVID-19 pandemic is significantly impacting financial institutions and their customers. Financial institutions must find ways to address borrowers, while dealing with constraints on their own resources as a result of the pandemic. Borrowers with student loans are at particularly high risk due to a surging debt level of $1.6 trillion and recordbreaking jobless claims
The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides immediate relief to many borrowers. For example, payments due on Federal Direct Loans are automatically suspended for six months, during which time interest will not accrue. It also stops collection on defaulted student loans. Certain states, including California and Virginia, have also issued policies and guidelines offering expanded relief in the private student loan market.
During the pandemic, financial institutions are diligently trying to maintain operations, even as much of their staff works remotely, while balancing the reality that some of their customers have stopped making payments on their loans. Financial institutions are in a unique position to provide relief to loan holders, being on the frontlines of this crisis.
This article discusses best practices that the federal government, financial institutions, and servicing agencies can employ to improve customer outcomes while addressing existing and new regulatory obligations and their stakeholders. What are key considerations to serving borrowers in this environment and beyond?
Special thanks to contributing authors: Jon Dolloff, Savannah Xiao and Bennet Habliston.