Which Student Loan Lenders Offer Economic Hardship Protections?


In an ideal world, you find a great job with a good career track. The steady income helps you make on-time student loan payments.

But Americans owe $1.56 trillion in student loan debt. And 11.5% of student loans are in default of 90 days or more, which is why employment protections such as economic hardship deferment are essential.

Consider that 38% of respondents for the National Association for Business Economics survey predict a recession in 2020. With painful memories of 2008, it is no wonder that many are nervous about their future job prospects. Having the ability to pause payments if you lose your job can give a borrower some breathing room.

Of course, if you leave the federal loan system, you’ll find that not all private lenders offer this level of protection. Let’s take a look at what’s out there, including…

Federal vs. private protections

Protections such as deferment and forbearance vary depending on whether your loans are from the federal government or a private lender.

With a federal loan, you can apply for relief to try to temporarily stop payments. A borrower could enter deferment for as long as three years or forbearance for 12 months at a time.

With certain federal loans, including direct subsidized loans, you typically won’t have to pay interest during deferment. This is not the case during forbearance. Private student loans will almost certainly continue to accrue interest during these periods.

Unlike federal loan servicers, private lenders aren’t held to a specific standard set of protections. The options available to you are dependent on the private lender with which you work. Terms may apply.

Online lenders that offer economic hardship deferment or forbearance

Some online refinancing lenders are more generous than others when it comes to student loan unemployment deferment and forbearance.

Among these lenders, you’ll find some creative solutions for serious problems. This is not a complete list of lenders that offer economic hardship deferment or forbearance, but it should give you an idea of your options.

SoFi

SoFi offers an unemployment protection program for out-of-work borrowers who weren’t fired for cause. This forbearance period, which is granted in three-month increments, can span 12 months.

SoFi’s forbearance option comes with job-placement assistance from the company’s career team. You can work with a career coach, get resume help and more.

It’s important to note that SoFi forbearance won’t extend your student loan repayment term, so your monthly payments — and principal balance if you don’t make interest-only payments — will increase.

Laurel Road

Laurel Road offers up to a year of full or partial forbearance in three-month increments.

It is only available at the lender’s discretion, so not every situation will qualify.

CommonBond

CommonBond allows its customers to pause loan payments. It offers up to 24 months of forbearance in the case of economic hardship, whether caused by job loss or something else.

You have to be less than 60 days delinquent on your loan to qualify. If you’re more than 30 days delinquent, CommonBond will try to process your request more quickly. After your request, you’ll schedule a phone call with a forbearance specialist to discuss the details.

Education Loan Finance

Education Loan Finance offers up to 12 months of forbearance due to financial hardships or medical difficulties.

The lender doesn’t provide more specifics on its website, so you’ll need to contact them for further information.

Earnest

Earnest offers up to 12 months of forbearance protection for borrowers who have lost income or experienced a significant increase in family costs.

The lender also offers other forms of repayment flexibility:

  • Push back a payment due date by seven days
  • Skip one payment a year after six months of on-time payments

Banks that offer deferment or forbearance

The pros and cons of taking out a student loan with a big bank aren’t always obvious, especially when it comes to protections such as economic hardship deferment and forbearance.

Unlike federal loan servicers, private lenders don’t have to grant you relief. Here are a few banks that offer unemployment protections.

Citizens Bank

Citizens Bank offers economic hardship forbearance.

It can be granted in two-month periods for a maximum of 12 months. You must make nine payments before becoming eligible for forbearance, and you can’t qualify for more than two forbearances in a five-year period.

Wells Fargo

If you lose your job, Wells Fargo offers short-term relief of up to two months. However, you will need to have made consistent, on-time payments to qualify for this option.

The bank asks you to call 800-658-3567 for more information.

A miscellaneous look at deferment and forbearance

There are online marketplaces and banks that don’t necessarily fall into the categories we’ve mentioned. Here’s a look at a few other companies that do — and don’t — offer economic hardship deferment.

LendKey

LendKey offers up to six months of forbearance to its borrowers, but the “up to” is an important qualifier.

Because LendKey is an online marketplace, there’s a possibility of receiving a rate quote from a community bank that may have little to no economic hardship protections.

iHelp

iHelp, which connects customers with community banks, has a hardship forbearance option for borrowers who qualify, though its qualifications are not clear.

PenFed Credit Union

PenFed Credit Union does not advertise deferment, but it says it would step in to help if a borrower loses their job or has an extraordinary circumstance. These decisions would be made case by case.

First Republic Bank

First Republic Bank is upfront about its lack of protections.

Its website includes the qualifier: “… this loan does not contain special features such as rescission periods, forbearance periods or income-based repayment plans available for some student loans.”

Gauge your need for deferment or forbearance protections

Before moving forward with a loan deferment or forbearance, you should be aware of the pros and cons. Accruing interest, for example, can significantly increase the size of your loan when you stop making payments.

If you have stability in your personal life and career, you might prefer a lender that’s light on protections but offers great interest rates. In an ideal world, of course, you’ll find a lender or bank that offers both.

For borrowers in more tenuous situations, work with a lender that offers an array of economic hardship deferment and forbearance options. It could make all the difference.

Sarah Sharkey contributed to this report.

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Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.



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