As New York considers reopening the State’s economy after a months-long shutdown, legislators recently reached an agreement with private student loan servicers to provide financial relief to borrowers. Spearheaded by the New York State Department of Financial Services (“DFS”), the agreement supplements the federal Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), by extending protections to over 300,000 New Yorkers with private student loans or commercial loans under the Federal Family Education Loan Program. The agreement between DFS and 90% of the private student loan servicers operating within the State fills in the gap left by the CARES Act, which only applies to loans owned by the federal government.
Under the agreement, student loan borrowers in New York may be entitled to a 90-day forbearance on payments, during which lenders are required to waive all late fees and refrain from transmitting negative information to the credit reporting bureaus. Additionally, all debt-collection lawsuits have been suspended for 90 days. The private lenders also have agreed to cooperate with eligible borrowers to enroll them in applicable borrower assistance programs.
The private lender agreement is the latest step taken by Gov. Andrew Cuomo’s administration to combat the coronavirus (“COVID-19”) pandemic. In mid-March, Gov. Cuomo suspended the collection of student loan debt owed to the State of New York until at least April 15, 2020. The Governor also passed new standards for the collection of student loan debt as part of the 2021 Executive Budget – one of the few policy initiatives that survived the effects of the pandemic on the 2021 budget.
Troutman Sanders will continue to monitor New York’s response to the COVID-19 pandemic and report on any development(s) related the student loan industry. Interested parties can always visit our Pepper Hamilton / Troutman Sanders COVID-19 Resource Center for breaking news and developments, recommendations, free tools, and our Response Team.