The coronavirus has put us in uncharted territory. What’s going to happen to our jobs, families and household finances for an undetermined period of time is hard to know. Banks, lenders, state and federal entities and many others are all coming together to try to help those of us experiencing financial shocks. (You can keep abreast of what the federal government is doing here.)
Many of us are (understandably) afraid of what lies ahead. Many are searching for answers. We’ve put together this guide to dealing with personal debt issues to help you cut through all the clutter. Here’s the latest information on how to deal with various hardships, whether it’s your credit cards, mortgage, student loans or loss of a job.
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The silver lining of this particular crisis is that for the most part, creditors and lenders fundamentally understand that consumers didn’t cause this, and they want to do what they can to help — it’s in their own best interests, after all. Banks need customers. (See the article, “How to deal with credit cards and other debts during the coronavirus crisis.”) They’re often willing to work with you via hardship or forbearance programs, lowering interest rates and suspending payments. Below is a list of resources that can help you navigate this difficult and confusing time — and gain clarity on how to move forward.
On March 27, Congress passed and President Trump signed into law the CARES Act (Coronavirus Aid, Relief, and Economic Security). (For a quick overview, The New York Times has put together a great collection of FAQs.) There are seven groups that will get relief from the act (from largest portion of the package to smallest):
We’re continuing to update any relevant sections below with more details about the federal relief program, but here are some highlights for individuals:
One-time cash payment: Most people earning less than $75,000/year can expect a one-time payment of $1,200. If you’re married, each spouse will receive a check and if you have dependents, you can expect $500 for each. As NPR notes, “The checks start to phase down after that and disappear completely for people making more than $99,000 and couples making more than $198,000.”
Additional unemployment aid: States will continue to pay unemployment to those who are eligible (every state has different requirements). In addition, the bill adds $600 per week (for four months) to what each state offers and extends unemployment benefits for 13 weeks.
Gig workers and freelancers: Typically not eligible for unemployment, this group of workers are eligible for temporary Pandemic Unemployment Assistance (PUA). According to the National Employment Law Project, “Those eligible for PUA include self-employed workers, including independent contractors, freelancers, workers seeking part-time work, and workers who do not have a long-enough work history to qualify for state UI benefits.” For more details, see the Unemployment Resources section below.
Student loans: Congress is offering relief on top of what the Department of Education has already announced (see Student Loan Resources section below for more details). Borrowers of federal student loans (including parents) can defer payments with interest suspended until September 30, 2020. In addition, if a borrower has already defaulted, debt collection is suspended (their wages will not be garnished and tax refunds will not be impacted). More details here.
Insurance coverage: The CARES Act requires that all private insurance plans cover COVID-19 treatments and vaccines and makes all coronavirus tests free. Here’s a breakdown of how health insurance providers are responding to the crisis.
Businesses are closing, letting many of their employees go. Others who were independent contractors or part-timers find themselves with a sudden drop in income. In the last two weeks of March, 9.9 million people applied for unemployment benefits (by contrast, it took six months to get to that number during the Great Recession.) Unemployment insurance has been a traditional safety net for many, but whether you qualify depends on many factors (here’s a useful breakdown). For example:
However, in addition to one-time cash payments to individuals, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which President Trump signed into law on March 27, allocated around $250 billion to unemployment benefits. Here’s a quick synopsis on what the CARES Act does for unemployed Americans.
Who benefits: The Act extends benefits to those who aren’t typically eligible — namely, part-time workers, freelancers, independent contractors, self-employed folks and even gig workers. (There’s a great article about freelancers and gig workers here.) The main requirement is that the reason for their unemployment has to be connected to the pandemic.
How much you get: In addition to what your state offers if you qualify, the CARES Act will pay $600 per week.
How long it lasts: The federal government’s $600/week package will last for four months through July 31. What’s more, the government will extend each state’s unemployment benefits an additional 13 weeks.
When it starts: Whereas states typically have a one-week waiting period after people apply before they can receive a check, the federal government is covering that week so you can get paid as quickly as possible.
Length of work history: The government is also waiving the requirement of length of work history for those who normally wouldn’t qualify based on how long they’ve had the job.In other words, if the job you lost due to the coronavirus is one you only recently started, you still get benefits.
How to apply: NPR gives great advice on the best way to apply for unemployment, especially since so many sites are overloaded with requests and are crashing. Here are just a few of their tips:
State-specific unemployment news:
There’s nothing like the stress of not knowing whether you can make your credit card payment to add to the anxiety surrounding the current crisis. And that’s the situation for most of us. A recent survey from CreditCards.com found that 59% of credit card holders (110 million Americans) came into this recent crisis with credit card debt.
The good news is that credit card issuers are more flexible now and are willing to work with you. Many are waiving late fees and interest charges, offering reduced monthly payments, temporarily reducing interest rates, or allowing you to skip payments due to hardship.
Contact your credit card issuer (either on their website or via the phone number on the back of your card) and simply ask. Here’s a comprehensive list of banks and their updated policies in response to the coronavirus. Here’s contact information for 15 major banks. Here are a few tips for asking for assistance:
Here are a few resources that might be helpful:
Medical debt has been a problem in the U.S. long before the current coronavirus crisis. In fact, according to a 2019 study, about 137.1 million American adults reported a “medical financial hardship” during the previous year. Another study found that 66.5% of all bankruptcies were related to a medical issue. The recent crisis is likely only to exacerbate this problem. After all, the coronavirus doesn’t discriminate based on who has health insurance, and it’s not as though insured people with the virus will have time to find an “in-network” provider.
Congress has already passed legislation that helps people pay for testing, requiring health plan providers to cover COVID-19 testing, medical visits related to testing and any future vaccine. However, with more than 180,000 Americans already testing positive as of April 1, the cost of medical care to actually treat the disease has not yet been addressed. (According to The Hill, early estimates of the cost of intensive COVID-19 care range from $20,000 to $70,000.) So, clearly the impact on the crisis on the medical system as a whole is still unfolding. That said, there are already resources beginning to surface:
As far as medical debt in general, there are a variety of programs and resources to consider:
The impact of the coronavirus on small businesses cannot be overstated. According to one report, “96 percent of small business owners are already feeling coronavirus impact.” At least 21 states have ordered lockdowns on several types of businesses (The Wall Street Journal has a good rundown of them).
There are serious concerns about rising unemployment and the wider impact of these closures — temporary as they are — on the economy as a whole. There will be financial aid packages to small businesses and money for unemployed workers, though many of the specifics are still being considered by Congress and state and local governments. For now, here are a few resources to start with:
The Federal government’s $2 trillion stimulus package (a.k.a The CARES Act) has plenty in it for small businesses – and that includes independent contractors, lone practitioners, as well as businesses who have fewer than 500 people – to the tune of $377 billion. There are plenty of great resources out there which dig deep, and we’ll link to those below, but here are a few takeaways to start:
Forgivable Loans: A total of $350 billion was put aside for small businesses, which will cover a variety of uses. Businesses won’t have to pay these loans back as long as they are spent on permitted uses.
Emergency Grants: To cover operating costs that businesses need ASAP, a fund of $10 billion was allocated and will provide businesses with up to $10,000.
Existing Loans: $17 billion has been set aside to cover six months of payments on existing Small Business Association loans.
U.S. Senate Committee on Small Business & Entrepreneurship: Small Business Owner’s Guide to the CARES Act
Student loan debt is a huge and growing burden on Americans. If you have a hefty balance on your federal student loans, you’re not alone — according to the NY Fed, 44 million+ borrowers owe $1.5 trillion on their student loans. And even before the coronavirus, borrowers were having trouble keeping up, with 11% of those student loans 90+ days delinquent as of the end of 2019.
Payments are suspended: Through September 30, federal student loan payments are automatically suspended. Borrowers will not be subject to late fees or penalties. (Note this only applies to loans held by the Education Department.)
Interest rates are 0%: Also through September 30, your interest rate will be 0%. After September 30, it will return to what it was before. If you can afford to still make the same monthly payments, more of your payment will be applied to previously accrued interest.
No wage garnishment: For those borrowers already in default (that means you haven’t made a payment in at least 270 days), the Department of Education is halting debt collection for some borrowers who are in default through September 30. (Garnishment will resume after this date, so you have time before then to get out of default.) This includes “wage garnishments, offsets of Social Security payments and interceptions of federal tax refunds.” Note that this only applies to federal student loans held by the U.S. Dept. of Education and it doesn’t apply to private student loans.
Public service loan forgiveness: If you are in a public service loan forgiveness program, you can pause your student loan payments through September 30, and those nonpayments will still count toward the required 120 payments.
Income-driven plans: Those in income-driven repayment plans can pause their payments until September 30 and these will still count toward the required 20 to 25 years of monthly payments.
Tax-free employer contribution: The Act also includes a temporary provision that allows employers to contribute up to $5,250 toward each worker’s student debt — tax-free — through December 31, 2020. (This is important, because if employers take advantage of this program, student loan debt would dramatically decrease.)
When you’ll see these updates: Under the CARES Act, you must be notified within 15 days of the enactment of whether you qualify for suspension, waiving of interest, suspension of debt collection and the temporary nature of these policies. That means that you might have already visited your servicer’s website and their site has old information.
Who ISN’T eligible: MONEY magazine estimates that at least 6 million borrowers are NOT eligible for these benefits. That’s because their loan are “federally guaranteed” as opposed to “federally held.” That’s about 12% of the federal loan total, and includes Federal Family Education Loans (FFEL). An additional 1.9 million Perkins loans are also ineligible. If your loan doesn’t qualify, here are some other options.
Additional federal loan resources:
If you have private student loan debt, the student loan provisions of the CARES Act don’t apply. However, if you are in danger of falling behind on your private student loans, you may be eligible for other kinds of assistance. Here are some tips:
Contact your lender: Many private student loan lenders are offering the same forbearance and deferment plans as the federal government. Call and explain your financial hardship. NerdWallet put together this list of private student loan lenders, their relief options and contact information for each. (Includes policies for Advantage Education Loan, Ascent Student Loans, Citizens Bank, College Ave, CommonBond, Discover, Earnest, Education Loan Finance, EDvestinU, First Republic, First Tech Federal Credit Union, iHelp, Laurel Road, LendKey, MEFA, MPOWER, Navient private loans, Navy Federal Credit Union, PNC, Prodigy Finance, RISLA, Sallie Mae, Splash Financial, SunTrust, SoFi, U-fi from Nelnet and Wells Fargo)
Refinance your loans. Refinancing combines any private and federal loans into a new private student loan with a lower interest rate. (Here’s a student loan refinancing calculator and here’s how to know whether you’re a good candidate and how to apply.) Because interest rates are so low right now, this might be a great option for paying your debt down faster.
Additional private student loan resources:
In times of crisis, housing and food should be our two top priorities. Whether you own your home or rent, your next payment (or next few payments) is likely top-of-mind right now.
In light of the severe loss of income millions of Americans are suffering right now, the fear of foreclosure is real. The good news is that unlike the 2008 financial crisis, banks typically aren’t foreclosing to cover their losses. Instead, many of them are offering mortgage assistance programs and help with home equity and home equity line of credit (HELOC) loans. Forbes has put together this list of major banks and their policies:
Under the CARES Act (signed into law March 27), service providers must offer forbearance to any homeowner of a federally backed mortgage. Those include loans owned by Fannie Mae, Freddie Mac and those guaranteed by the Department of Veterans Affairs, the Department of Agriculture and the Federal Housing Administration. These lenders must allow forbearance or reduced payments for 180 days (and another six months if homeowners request an extension due to continued financial hardship). The Act also forbids mortgage loan service providers from reporting any negative activity to credit bureaus and from charging late fees or penalties during the forbearance period.
MarketWatch offers several tips for taking advantage of the mortgage relief measures. Here are just a few:
Additional mortgage-related resources:
According to Pew Charitable Trusts, nearly 43 million Americans rented their homes in 2016. Even before this crisis, 38% of all renter households were “rent-burdened” — meaning, they spent 50% or more of their monthly income or more on rent. And that number has only been increasing. Now with so much income loss, “making the rent” is harder than ever. Here are some resources that might prove helpful:
Car payments are another source of concern for Americans. In 2019, the average monthly car payment was $544 for a new car and $391 for a used car. That’s a lot of cash when your income has been lost or significantly reduced. But most banks and credit unions don’t want to see you default on your loan (or face repossession) and are willing to work with you, especially in light of the plummet in new sales in the first quarter of 2020.
As more and more Americans struggle to come up with money to pay the bills, many will turn to personal loans as a lending vehicle. Why? The interest rates on personal loans are typically lower than credit cards, and because the payments and interest rates are often fixed, they can be easier to budget for.
The stimulus money offered by the CARES Act will only go so far.If you need to borrow money, U.S. Bank and Capital Good Fund are both offering small loans and reduced rates. Other sound options for good deals in an ever-tightening credit environment include credit unions and some online lenders.
And for people who already have personal loans and are now finding it difficult to make payments, many lenders are already offering programs to defer payment for a period of time. Though keep in mind, these loans are likely to continue to accrue interest, so while you won’t get hit with late fees, they will continue to grow. NerdWallet has a list of other lenders offering payment help, including Best Egg, Discover, Lending Club, PNC, Upstart and Wells Fargo.
If you have a personal loan you can’t afford to pay right now, reach out directly to your lender to learn what your options are, and be sure to ask about interest rates and accrual, the impact on your credit and how long the program will last. Here are a few resources that can help you figure out what to do about existing personal loans and how to evaluate any new loans you might be considering.
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