Stability After Pandemic Relief Programs

2020 has brought difficulties for so many across the country – from losses of income, medical concerns, and new social norms. But it also has seen several initiatives to meet those needs. Below are three pandemic relief initiatives that have deeply impacted our clients and steps to take before they end on December 31.

Starting in September 2020, landlords were not allowed to evict renters if the reason was inability to pay due to COVID. However, that doesn’t mean that these payments were forgiven. The amounts are still owed.  And with the moratorium ending December 31 on most homes, a staggering number of families are seeking solutions.

• Talk with your landlord
  • Many landlords would rather work out a plan to help you get caught up rather than find a new tenant. Be honest with him or her about your finances and what is feasible. The goal is always to find as close to a win-win as possible: something that’s affordable for you that keeps you in the home while still getting the landlord what they need to keep afloat.
• Know your resources
  • Another recent blog provides a good list including United Way, JustShelter if you are facing homelessness, Legal Aid for legal concerns, and rental search options.
• Check whether your state has funds set aside for assistance
  • For residents in my state, Kentucky, the funds for Heathy at Home rent assistance has been exhausted, but utility assistance has not. For nationwide options, click here  or check out the USA Disaster Financial Assistance for food, housing, and bills.

Millions of families have utilized the CARES Act deferment of their mortgage during 2020. This has allowed them to make reduced or no payments for months while waiting to return to work or find new employment. But just like with rentals, the missed payments are not simply forgiven. How long can these deferments last, and what can be done once they run out?

• Know what type of mortgage you have
  • If your mortgage is backed by the government (meaning FHA, USDA, VA, Fannie Mae, or Freddie Mac), you have until December 31 to request a COVID deferment if you haven’t already. The deferment generally lasts 180 days (6 months) from the time you request it, and can possibly be extended another 180 days if you are still struggling. (For more info and link to see if your loan is one of these types, check out CFPB’s mortgage pandemic relief page.
• Talk with your mortgage servicer
  • Ask when your deferment ends and whether it can be extended if you need it. Don’t miss getting a needed extension just because of missing the deadline to request it!
• Know your options for the missed payments
  • Once the forbearance ends, you resume making the regular monthly payments that you were before. Technically all of the months that have been put on hold are also due as a lump sum. However, there are options. For the government-backed loans listed above, the unpaid amount will be put to the end of the mortgage at 0% interest. Once you pay off the rest of the loan or sell the home, then that amount comes due.
• When temporary forbearance isn’t enough
  • For all other loans, or homeowners with government-backed loans who are now working at lower income, you can request to be reviewed for more long-term options. If your credit score is still high enough, this could mean a refinance. But for those with lower scores, this would more likely mean a modification. The modification would take the amount you’re behind and put it back into the balance of the loan. It may also be able to permanently lower your monthly payment and/or interest. This is a more expensive option in the long-term since you’re paying interest on those missed payments and stretching out the number of years you pay on the house. But if it makes the home affordable again, many families find it worth it.

If you either were denied a modification or don’t feel your current home will be affordable for the foreseeable future, aim to be proactive about selling and downsizing if possible. If you can sell before any forbearance amount shows as a delinquency on your credit, it preserves your score and therefore your chance at a new home or better terms on a rental.

Borrowers with federal student loans have had some unprecedented relief through deferment on their loans since March 2020. Borrowers did not have to request the assistance, loans were simply put on hold, accruing no interest until the extended end date of December 31, 2020. Unlike the rental and mortgage situations above, there is no lump sum of payments due at the end of the deferment. Borrowers are anticipated to resume payments in January 2021 unless other arrangements are made. Let’s look briefly at the most frequently used options:

• Standard payment plan (10 years)
  • When you graduate, this is the plan you are automatically enrolled in unless you choose a different plan. You pay 120 monthly payments until the loan is paid in full.
• Extended payment plan (25 years)
  • As above, you make monthly payments until the balance is paid in full. Because it’s stretched out longer, the monthly payments are significantly lower.  However, the overall cost at the end of the plan is higher.
• Income-driven options (most are 20 years)
  • Rather than basing your payment on the balance owed, your loan servicer bases your payment on your income and family size, which could be as little as $0/month. The plan must be recalculated based on updated income numbers annually. If the 2- years of payments do not pay off the full principle balance, the remainder is forgiven.
• Continued deferment or forbearance
  • If you anticipate being back to work soon, but not immediately, or perhaps if the income-driven option is higher payments than you can afford, this could give you a few more months to skip payments. Be careful, though.  Unlike the COVID deferment, interest is usually accruing.  This means the balance is going up and the payments are going to be higher once you do start paying. Deferment is not a long-term solution since it continually pushes out the completion date of your loans. There is no loan forgiveness associated with deferment or forbearance.

If you haven’t already talked with your loan provider about your options , it’s not too late. Check out your bill for a good contact number or by calling the National Student Loan Data Systems at (800) 4-FED-AID or by logging in with your FAFSA ID at www.studentaid.gov.

Still reeling with feeling like there’s too many options? Feeling stressed your pandemic relief program is ending?  Need help accessing all pandemic relief options? Apprisen is happy to walk with you through those steps. If you don’t know where to start, our online financial review is a great first step. It’s free, secure, & mobile-friendly.