If you’re facing any kind of financial challenge related to COVID-19, you are not alone. While claims are slowing, people are still losing their jobs and filing for unemployment. Millions of people are grappling with major income losses or disruptions, particularly Black and Hispanic families, who have been hit the hardest.
Finding any kind of relief right now to manage your bills is overwhelming. It’s frustrating. You’ve heard the horror stories about people trying to get on the phone with their state or local agencies, or you may have dealt with this yourself.
Which is why it’s more important than ever to be persistent. Try to get what you need. While attempting to access COVID-19 debt and payment relief is an incredible challenge, there are options out there. Financial institutions, government agencies, and service providers are all trying to figure out the best ways to assist those in need.
To help you in your research, here is a guide to debt forbearance, forgiveness, and relief during the COVID-19 pandemic. Read on for the information to help you access the relief you need right now, and a few tips to get the most out of what’s out there. Please know that new programs and relief options are still in the works as the outbreak continues to spread. This guide is up-to-date as of August 3, 2020.
One more note: Our hearts go out to everyone impacted by COVID-19. We hope this guide helps to provide some insight and wisdom if you require payment relief or forbearance on your debt and payments at this time.
Your guide to understanding payment forgiveness, forbearance and relief programs on your mortgage, loans and credit cards
This guide covers some of the major developments introduced to help you if you have been financially impacted by COVID-19, including what your options are for:
- Federal student loan debt
- Private student loan debt
- Car insurance
- Health insurance
- Renters protections
- Homeowners and mortgage debt
- Credit cards
- Personal loans
- Auto loans
- Business loan debt
At the end of this guide, we’ve also compiled a list of steps you should take if you are in need of payment relief because of COVID-19.
Student Loan Forbearance and Forgiveness
One of the biggest myths about student loan debt and COVID-19 is that all federal student loan debt is forgiven or eliminated. As of August 3, 2020, federal student loan debt has not been forgiven. There is, however, some relief available to student loan borrowers.
Federal Student Loan Debt Forbearance and COVID-19
As part of the CARES Act that was signed into law in late March, all federal student loan debt has been placed on temporary forbearance until September 30, 2020. This means that if you have federal student loan debt, you do not owe any payments and your interest rates are reduced to 0% until September 30, 2020. After that date, the 0% interest rate will be removed, and your normal monthly payments will resume on your scheduled due dates. You will not be required to make up for any of the payments you didn’t make during this period.
You can still make payments on your federal loans, but since you’re not accruing interest, it might make sense to direct that money toward other commitments.
The CARES Act also mandated that anyone who was enrolled in college who received a Federal Pell Grant will not be required to return that money if they had to drop out of school because of COVID-19.
Private Student Loan Debt Forbearance and Assistance
While there isn’t federal action to assist anyone with private student loan debt, many loan servicers are offering COVID-19 related assistance.
Some companies are offering temporary forbearance, which can pause payments for a set period of time. Other companies are offering programs that reduce monthly payments for anyone’s income that was affected by COVID-19.
Assistance and Relief Programs for Car Insurance
Large auto insurers made news back in April when they announced that they would temporarily provide relief for policyholders.
Some companies are extending their initial premium discount as the pandemic continues, which means you may continue to see a reduction in your payments. You might also be able to access flat credits and refunds if you ask your auto insurer.
Other types of car insurance relief for COVID-19
In addition to credits for policyholders, some car insurance companies offering support in other ways. Many larger insurers are promising not to cancel coverage if someone cannot pay their bill because of the coronavirus outbreak. Others are providing billing relief by suspending fees or allowing you to defer payments.
COVID-19 and Your Health Insurance Plan
During a public health crisis, it’s more important than ever to understand your health insurance policy. Whether you receive health insurance benefits from your employer or through a marketplace, knowing the ins and outs of your policy, what you’re covered for, and what happens if you can’t pay for health insurance premiums are essential.
Here are some of the other ways health insurance providers are assisting their policyholders during COVID-19:
- Covering cost-sharing (like copays) on COVID-19 related expenses, including testing and treatments
- The promise not to remove coverage if you can’t pay your premium because of financial challenges related to COVID-19
- As part of the CARES Act, supporting telemedicine and virtual care
What protections and relief are available for renters?
The CARES Act put a hold on any eviction action through the end of July on properties with government-backed loans, which covers some multifamily housing. But besides a few exceptions for federally-subsidized housing, there aren’t sweeping federal protections for renters.
Many cities, counties, and states have introduced protections to prevent renters from eviction. Many states have also paused all current eviction proceedings, or cover when city moratorium periods end.
The CFPB recommends looking up your state’s specific renters’ protections through Princeton University’s Eviction Lab Tool, which tracks COVID-19 related relief at the local, state, and federal level.
If you are going to have any difficulty paying your rent, contact your landlord before your rent is due. Additionally, remember to review what rights you have as a tenant in your municipality.
Mortgage Forbearance & Relief for COVID-19
Mortgage forbearance allows you to pause or reduce payments for a temporary period of time. During the coronavirus outbreak, many mortgage servicers are offering forbearance options that can help provide payment relief to anyone experiencing financial strain because of the virus.
But do your research before taking any forbearance options that your mortgage servicer may provide.
Why? A forbearance will likely impact your mortgage payments in the future, and the effects will vary widely depending on your mortgage servicer.
The CFPB also advises that you ask yourself questions like:
- Will your mortgage term be extended if you accept a forbearance option or will it remain at the original term length?
- Will you have to owe your unpaid payments in a lump sum after your forbearance period?
- Will your monthly payments be higher after the forbearance?
The CARES Act has helped to protect Americans from eviction if they miss 3 payments on Freddie Mac or Fannie Mae-backed mortgages because of COVID-19. But if you have any concern you may not make a mortgage payment, the most important action you can take right now is to get in contact with your mortgage servicer.
Credit Card Payment Assistance For COVID-19
Falling behind on credit card payments is becoming a reality for more and more Americans as they juggle several payment obligations.
While everyone’s financial situations are different, your first line of attack in making credit card payments is just to try to pay your minimum each month. While you’ll likely be charged interest on any unpaid balance, paying the minimum keeps you from going past due. Being late or missing credit card payments can have long-term negative impacts on your credit score and with your credit card company, which can impact your credit score for years into the future.
If just making the minimum is not an option right now, some credit card companies are offering COVID-19 related assistance. The options from major credit card companies are a mixed bag. Some are waiving fees or allowing you to defer payments for a few months, but others are offering emergency loans, and credit limit increases to existing customers.
Paying Off Personal + Auto Loan Debt During COVID-19
If you’ve been financially impacted by COVID-19, your personal and auto loan debt is likely not forgiven, but loan servicers may offer some kind of forbearance or relief that can help you in the short-term.
Like credit card companies, many auto and personal loan servicers are providing some assistance for anyone financially struggling because of COVID-19. Some are offering reduced payments or pausing payments, but what is available will depend on your loan servicer.
Before accepting the terms of any forbearance or debt payment relief during COVID-19, make sure you understand how that relief will impact your loan and future payments.
How the Coronavirus is Impacting Business Loan Debt
Many small business owners and self-employed contractors are facing tough decisions—and figuring out how to pay off business loans is one of them.
Some of the ways you can take advantage of the Small Business Administration’s (SBA) payment relief and assistance during the pandemic include:
- Full forgiveness when you participate in the Payroll Protection Program (PPP) as long as “the funds are used for payroll costs, interest on mortgages, rent, and utilities.” FYI: The next deadline to apply for a PPP loan is August 8, 2020.
- Emergency Disaster Loans (EIDLs) up to $10,000
- Express Bridge Loans up to $25,000
- Payment relief for existing SBA loans
In addition to federal assistance, many municipalities and states are offering grants and other types of assistance for small businesses that can help cover debt payments or other obligations your small business may have.
What you should do if you need COVID-19 payment relief
- Get your paperwork together
Many of your service providers will have programs to assist. They may, however, require you to prove that you’ve been financially disrupted by COVID-19. While it may feel unnecessary or perhaps intrusive during your time of need to ask for documentation like that, companies just want to make sure they can provide relief for the people who need it the most.
To make sure things run as smoothly as possible, be prepared to have some kind of documentation to show your circumstances to any organization you reach out to.
- Contact your institutions
Whether your service providers have reached out to you or not, take the time to get in contact with them to take advantage of any relief they may offer.
While some companies are automatically providing relief, others will require that you ask or fill out a form. If you need this relief, do not hesitate to get in contact and get the help you need.
Many companies have dedicated phone numbers and websites so you’ll be able to speak to the right people, but be sure to communicate that you are in need of assistance, not just that you’re asking about it.
- Do your research on local and state relief programs
Keep staying up-to-date on everything your state is doing to provide relief right now. State lawmakers are passing new bills as time goes on to keep their people safe and employed, so make sure to follow the latest.
- Contact other financial companies you do business with
If you’re not able to salvage what you need from relief programs, you may want to consider other measures to get the money you need to stay afloat.
Connect with your local financial institutions to see if they have anything available. Community lenders and small business associations may be providing some assistance.
Additionally, if you belong to a credit union, now is the time to see if you can take advantage of any membership benefits.
- Adjust your personal finances
If you’re not already cutting back spending and researching how to use your assets to pay for the essentials, take some time to rework your budget for the new normal.
If you’ve been fortunate enough to save up an emergency fund, now may be the time to dip into it (it’s there for emergencies, so use it if it’s an emergency).
And while we don’t recommend tapping into your assets like retirement savings often, using your assets to help cover your expenses might be a responsible financial choice during emergencies.
One of the consumer benefits of the CARES Act included the IRS waiving the 10 percent tax penalty for early withdrawals from qualifying plans and lengthening the time to pay back a retirement loan. These benefits are only for certain individuals who have been impacted by COVID-19 who have qualified retirement packages, so be sure to contact your employer and your service provider before taking any action against your retirement savings.
A final note about seeking payment relief and forbearance during COVID-19
Debt forbearance, payment assistance, and COVID-19 relief are out there for those who need it. These options might not be able to cover all of your financial challenges, but they can help to ease some of the burdens. A lot of service providers and government agencies have rolled out temporary solutions but they are evolving as the economic impacts continue.
And while we hope this guide helps to clarify and provide some wisdom into navigating forbearance and payment relief right now, we recognize these solutions are not going to help everyone.