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The Bank of Family and Friends: New Student-loan Wrinkle

The Bank of Family and Friends: New Student-loan Wrinkle

Such loans are still available contrary to sky-is-falling predictions but students are having to hunt for banks or turn to the federal government itself

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The credit crunch has driven dozens of lenders out of the student loan market. But a number of new Web sites are trying to sidestep the traditional players, facilitating loans between students and anonymous investors or even friends and family members.

The latest startup player in the so-called peer-to-peer student lending market, GreenNote, marks its official launch Wednesday. The timing is intended to attract interest as students piece together financial aid over the summer.

Fynanz, a competitor that matches up students anonymously with investors, says it’s gotten 180,000 applications in the last three days alone.

Meanwhile, the credit squeeze is affecting some students as they try to find private loans, which more and more students need once they hit the ceiling on cheaper federal aid.

Peer-to-peer loans are trying to step into that private-loan ount to more than a tiny sliver of it anytime soon.

The idea is that students can secure better terms by turning to individual investors willing to back them. Investors may get satisfaction from helping out a child, relative or friend. And if the lender knows the borrower personally, it lessens the likelihood of late payments or default.

I do think they have some long-term promise, said Mark Kantrowitz, who runs the Web site . I can see something like alumni using one of these sites as a way to provide loans for current students.

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Education Relief Act (subset of CARES Act)

Education Relief Act (subset of CARES Act)

The CARES Act protections are still in place, meaning that waived interest and deferred payments on federal student loans through . The waived interest and deferred payments are automatic, so you do not need to contact your loan servicer. This policy only applies to federal student loans and is a temporary deferment, not forgiveness, meaning, you still have to pay your student loans but payment is not required until after . The CARES Act also stops the involuntary collection of student loan debt during this time, including garnishment of wages, tax refunds, and social security benefits. It is possible that additional student loan support will be provided past the January deadline.