Do Private Student Loans Qualify for Coronavirus Relief?

As the coronavirus has thrust the economy and daily life into turmoil, millions of Americans who have lost jobs or wages are worried about paying bills. Layoffs and furloughs may lead to skipped student loan payments.

Three-quarters of people in an April survey from Freedom Debt Relief said COVID-19 has affected their finances, and 30% said they are likely to miss a student loan payment in the next six months.

If the coronavirus has hampered your ability to pay student loans, help is available but will depend on the type of loan you have.

The new Coronavirus Aid, Relief, and Economic Security Act includes financial relief for federal student loans, but those benefits don't apply to private student loans. That doesn't mean you are left without options.

Here's what you need to know if your student loans are not eligible for federal coronavirus relief.

[Read: Best Student Loan Consolidation and Refinance Companies.]

Are Your Private Student Loan Payments Waived?

Because private student loans are not included in the CARES Act, borrowers have two main options: keep making payments or contact the loan servicer if you've been financially affected by the coronavirus.

While the federal government is waiving payments and interest charges for federal student loan borrowers, private student loan borrowers have to ask loan servicers about special financial relief programs. Private lenders typically offer forbearance programs, which allow borrowers to suspend loan payments for about two to three months.

During forbearance, interest may continue accruing, and some lenders "capitalize" the interest. That means they roll it into the unpaid principal, which increases the cost of your loan.

Options such as pausing or reducing your payments lengthens the loan term, which means you'll pay more interest over the life of the loan. That's why Jay Fleischman, a Los Angeles-based student loan lawyer, recommends making payments for as long as you can.

"If you don't have income and you can't make payments, your first line of defense is to contact the servicer," he says. Lenders may offer an extra 30, 60 or 90 days to pay.

But be careful, Fleischman says: "I feel this will put people in a position where they just kick the can down the road a little bit."

Although interest accrues while loans are in deferment or forbearance programs, either one can help you avoid late fees and damage to your credit history. Deferment and forbearance show up on your credit report but do not affect your credit score.

[Read: Best Private Student Loans.]

How Are Private Lenders Helping Borrowers?

Here's how some private student lenders are helping borrowers whose finances have been hurt by the coronavirus:

-- College Ave borrowers can apply for a disaster forbearance program that suspends payments for three consecutive months. Interest will continue accruing, but it won't be capitalized.

-- CommonBond is waiving late fees and allowing private student loan borrowers to postpone payments through a natural disaster forbearance program. You can pause payments until the end of the COVID-19 national emergency declaration, and this won't count toward your forbearance limits. The lender charges no fees to participate in the program, but interest will continue to accrue on any loans in forbearance.

-- Earnest lets private student loan borrowers postpone payments for up to three months after applying for its disaster forbearance program. Interest accrues while payments are postponed, but it won't be capitalized.

-- Navient borrowers can call 888-272-5543 and request up to three months of disaster forbearance. Interest will accrue during this period but won't be capitalized. Navient borrowers may also apply for its rate reduction program, extended repayment plan or interest-only payments.

-- Sallie Mae borrowers who are affected by the coronavirus can chat with the lender online or call 800-472-5543. Hardship forbearance is available in three-month increments for a total of 12 months over the life of the loan. During forbearance, interest will continue to accrue and capitalize on the balance.

-- SoFi student loan borrowers can apply for up to 60 days of forbearance, with the option to extend.

Will Your Private Student Loan Interest Rate Change?

The Federal Reserve's emergency rate cut in March could create a domino effect and make borrowing cheaper for consumers. If your private student loan has a variable interest rate, then it may decrease in the coming months.

Lenders that offer private student loans often tie variable rates to a benchmark called Libor, or the London Interbank Offered Rate. The Fed rate and Libor tend to move in tandem, and when the Fed raises or lowers borrowing costs, private student loan interest rates usually follow suit.

Refinancing your private student loan is another way to take advantage of falling interest rates. It may be a good time to refinance if you meet the lender's qualifications, and you have stable income and good credit, says Leslie Tayne, a debt resolution lawyer whose focus includes student loans.

"You don't want to wait until later in case you become unemployed, which may make it more challenging to refinance," Tayne says.

[Read: Best Student Loans Without a Co-Signer.]

Other Ways to Manage Your Private Student Loans

Certain moves may help you make your private student loan payments if the coronavirus curtails your income. After you talk with your loan servicer, consider these options:

Refinance your student loan. Refinancing lets you borrow a lump sum of money, pay off your original student loan and then pay down the new loan. Ideally, you'd find a lower interest rate to help you save money or switch from a variable interest rate to a fixed rate for a more predictable payment.

Whether you should refinance depends on the type of student loan you have and whether you qualify for better loan terms. Also, keep this in mind: "Taking a federal student loan and refinancing into a private student loan isn't always advisable," Tayne says.

That's because federal student loans come with several borrower protections -- including flexible repayment options and CARES Act benefits. But if you have a private student loan, then refinancing into a new loan with better terms can be a no-brainer.

Ask your employer about loan repayment assistance. The CARES Act allows employers to provide up to $5,250 tax-free when reimbursing employees for student loan payments or giving tuition assistance , through Dec. 31.

This is good news for private and federal student loan borrowers as well as employers. Borrowers won't owe income taxes on employer contributions, and employers get a break on payroll taxes.

Check whether your employer offers student loan repayment assistance benefits or plans to, Tayne says. These could help you continue payments during this stressful time.

Use your stimulus check. The CARES Act provides emergency cash relief to millions of Americans. Certain taxpayers may be getting checks that could help cover student loan payments.

Some single taxpayers may receive up to $1,200 and some married couples up to $2,400 -- plus, $500 for each qualifying child.

Even if your loans are in forbearance, you could use some of that stimulus money to chip away at interest costs. Doing so can help defray the overall cost of your loan.

Reallocate your student loan payments. You may have a mix of private and federal loans if you have more than one student loan. If you pause federal loan payments and you can afford to do so, redirect that money toward your private student loans, Fleischman says.

"Look, every couple hundred bucks counts," he says. "If you're able to pay down some of the principal on your private student loans, that will be a longer-term savings."

Keep your priorities straight. Make your private loan payments for as long as you can, and reach out to your loan servicer if you're struggling with lost income or financial uncertainty. You may have to prioritize your bills at some point.

"If the servicer is not willing to do anything, and your income truly won't allow you to keep a roof over your head, food on your plate and still pay the private student loans, then you've got to take care of yourself first," Fleischman says. "When (the coronavirus crisis) ends, then you can worry about picking up the pieces and putting things back together financially."