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The Pandemic Safety Net Is Coming Apart. Now What?

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David M. Brenner, ChFC®, CLU®

D. M. Brenner, Inc.
Phone : (858) 345-1001
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One by one, pandemic relief programs that financially supported millions of Americans are going away.

Robert Neubecker .jpeg

Robert Neubecker .jpeg

With legislative packages worth trillions of dollars, the federal government wove a temporary safety net that provided help for people dealing with lockdowns, job losses and worse. But many of the most far-reaching protections, including eviction moratoriums and expanded unemployment benefits, are about to expire. Provisions affecting student loans, food stamps and more are scheduled to follow in the coming months.

It’s not all bad: This month, millions of households are receiving the first of six monthly payments that are part of an expanded child tax credit. But if you rely on any of the programs that are going away, this is an anxious time.

Fortunately, there’s still help out there — and here’s how you can find it.

Eviction Protections

Last year, the federal Centers for Disease Control and Prevention imposed a nationwide eviction moratorium and then extended the pause until July 31. But the agency declared that was “intended to be” the last extension. Barring some last-minute change because of rising numbers of coronavirus cases — which would probably have to overcome legal challenges — the moratorium will end in a few weeks.

Unless your state or local government has extended the moratorium further — the prohibition in New York state ends Aug. 31, for instance, and an organization called Eviction Lab has a list of others on its website — landlords may be able to move quickly. This is especially true for tenants whose evictions were in progress when the pandemic started, or those whose landlords have already taken legal actions that remained allowable during the moratorium — which included parts of the eviction process short of the actual removal of tenants.

People who are trying to prevent their own evictions may have the right to legal counsel, as they do in New York City and San Francisco. Others should inquire at their local Legal Aid office. An organization called Just Shelter also has a helpful map on its website pointing to organizations offering assistance.

But just because moratoriums are expiring doesn’t mean all forms of government aid for tenants are going away: Billions of dollars of federal rental assistance remain available. The Treasury Department has published a searchable list of local programs that are distributing it, as has the National Low Income Housing Coalition.

Look for help as soon as you think you may need it. Diane Yentel, the housing coalition’s president and chief executive, said in an interview that bureaucratic rules are slowing down the process in some places. Meanwhile, some landlords are refusing to participate in rental resistance programs, perhaps because they wish to take their chances with new tenants who might have steadier incomes or because they do not wish to provide the required documentation for units that they are renting out illegally.

Unemployment Insurance

Pandemic relief legislation made transformative — but temporary — changes to the way the unemployment insurance system works. It expanded eligibility, increased payments and extended benefits for longer periods, augmenting the programs run by each state.

But federal support for those changes expires on Sept. 6. Roughly half the states have already announced plans to turn off some or all pandemic-related benefits even earlier, according to the National Employment Law Project and the Century Foundation. Some of those states’ attempts are the subject of lawsuits.

“It is really a shame that depending on what state you live in, because unemployment insurance is such a patchwork of rules and weeks, determines how well you weather this crisis,” said Rebecca Dixon, executive director of the employment law project.

Even if lawsuits keep states from ending benefits early, time is still running out: All pandemic-related federal benefits are scheduled to end in less than two months, including the $300 weekly supplemental payment that significantly increased the benefits for millions of struggling Americans.

Also ending are the Pandemic Unemployment Assistance program, which provides weekly benefits to workers who typically are not eligible, including the self-employed, gig workers and part-timers; Pandemic Emergency Unemployment Compensation, which provides additional weeks of federally funded payments to people whose regular weeks of state benefits have run out; and the so-called mixed earner supplement, worth an extra $100 a week for people who are often stuck with small state benefit payments because they have a mix of income from self-employment and wages paid by other employers.

President Joe Biden said last month that it made sense for the $300 supplemental payments to end in September, but it’s unclear if there are any immediate plans to extend other pandemic programs. The White House has said it is studying policy options for workers who are typically not covered by the traditional system, and other policy experts said discussions about reforming eligibility are ongoing.

Millions of people will still be collecting money from federal pandemic unemployment supports when they expire on Sept. 6, said Andrew Stettner, a senior fellow at the Century Foundation. “The prospect of extra aid seems unlikely,” he said.

States will continue to run their traditional programs, each with its own rules, and benefit size and length vary. Some workers may be eligible for extended benefits, which typically become available during periods of high unemployment. The details depend on location, so check the unemployment website in the state where you’re employed.

Student Loans

Payments for most federal student loan borrowers have been paused since March 2020, though borrowers have had the option to continue making payments. Most of them didn’t: Tens of millions of people are still taking advantage of the so-called administrative forbearance offered by the Education Department. The relief also included a halt on collections for borrowers in default.

As of now, payments are scheduled to resume no earlier than Sept. 30. Many borrowers and consumer advocates have been pushing for another extension into the new year — and Miguel A. Cardona, the education secretary, didn’t rule it out during congressional testimony last month. The pressure for an extension only increased when one of the government’s largest loan servicers said it wouldn’t renew its contract when it ended later this year. Accounts will have to be moved to a new servicer just as the giant task of restarting payments is getting underway.

But nothing has happened yet, so borrowers would be wise to at least begin preparing.

To start with, borrowers can expect a notice or billing statement about three weeks before their payment is due. Payments that are automatically debited are expected to resume on the first due date after payments are again required. Make sure your contact information is updated on your loan servicer’s website, as well as in your StudentAid.gov profile. It could save you a lot of headaches by ensuring that you’re properly notified about restarting payments.

Your situation may have drastically changed since March 2020, and your payment may be a bit different, too. The best place to start is with your servicer: Find out what your payment will be. If you cannot afford that amount, use the Education Department’s loan simulator to see if there’s another repayment option that would better suit your situation.

For some borrowers, the best option may be an income-driven payment plan, which bases monthly payments on how much they make. If you’re interested, act now. Servicers could be crushed with such requests in the months ahead, experts said.

There are still questions about how restarting payments will work for certain borrowers. For example, it’s unclear what borrowers who were in default before the pandemic — or those who were having their wages garnished — can expect to happen. An administration official said the Education Department was “considering a range of policy options to ensure there is as clean a transition as possible once the pause ends.”

If you need more guidance, groups including the Institute of Student Loan Advisors can offer free help.

Health Insurance

There are a couple of pending deadlines for people who don’t have or recently lost health insurance coverage.

First, there’s a special enrollment period — through Aug. 15 — via the federal marketplace at healthcare.gov, for people who buy their own coverage. The Kaiser Family Foundation publishes a calculator that can estimate your premium, which may be lower thanks to new federal relief that runs through the end of 2022. Kaiser has also published a lengthy explainer.

Second, there is a particularly generous benefit for people who have lost their jobs or whose employer reduced their hours. Through Sept. 30, the federal government will generally pay the entire premium for coverage through the Consolidated Omnibus Budget Reconciliation Act, better known as COBRA, for qualifying individuals who wish to keep the health insurance they got from their former jobs. Normally, you have to cover the entire cost yourself — which is hard to do when your income has suddenly fallen.

Another lesser-known benefit expires on Dec. 31: Many people who experienced unemployment are eligible for free premiums (via a tax credit) on certain plans they buy on healthcare.gov or their state’s exchange. This, too, is complex; healthcare.gov outlines the rules.

Mortgage Forbearance

Millions of homeowners with federally backed mortgages have opted to temporarily pause their loan payments, a form of relief offered since March 2020.

But many borrowers who have continuously skipped payments since then are approaching the end of that road: They will reach their maximum term of 18 months in September, when their payments will restart.

At that point, homeowners will have a choice to make. Their loan servicer should offer several ways to catch up and pay back their missed payments, or the option of tacking them to the back of the mortgage — in other words, the borrower would settle up when the home is sold or refinanced or the loan is paid off. Loan modifications that lower borrowers’ payments are another possibility.

There’s also still time to enter a new forbearance plan, though the rules and deadlines vary based on the type of loan you have.

Fannie Mae and Freddie Mac, which back about half of all outstanding mortgages, still haven’t shut down their COVID-19 forbearance program — regulators will wind it down when they deem it appropriate. Homeowners with those loans can still enroll and temporarily pause their payments for up to a year.

But those who enrolled as of Feb. 28 may be eligible for up to 18 months of skipped payments, though other limits may apply, according to the federal regulators that oversee the two government-sponsored entities.

Meanwhile, homeowners with other federally backed mortgages — loans insured by the Federal Housing Administration (known as FHA loans) and those guaranteed by the Department of Veterans Affairs and the Department of Agriculture — received an extended reprieve. Borrowers who haven’t yet suspended payments can start a new forbearance through September, according to the Biden administration.

The Biden administration also said last month that it would extended the foreclosure moratorium for federally backed mortgages by “a final month,” until July 31.

Before borrowers reach that point, they should be considered for other options. Fannie and Freddie borrowers, for instance, who have reached the end of their forbearance periods may be eligible for a loan modification. That modification could cut their payment by roughly 20%, regulators said, by extending the loan term to 40 years and potentially cutting the interest rate. But the extent of the payment cut will depend on your situation.

Distressed homeowners with loans owned by private banks or investors should contact their mortgage servicer to see what options they’re offering. Some of them have followed a framework similar to federally backed loans, but others’ terms may be murkier.

No matter what type of loan you have, the most important action to take now is to reach out to your mortgage servicer to find out when your payments will resume and how much they will be. If you cannot afford them, the servicer can lay out your options. For more guidance, you can also seek out a housing counselor.

Food Assistance

The changes made to food stamps — now largely known as the Supplemental Nutrition Assistance Program — during the pandemic were complicated.

But one significant change, a 15% bump in benefits for all recipients, runs only through Sept. 30. So if you currently receive SNAP benefits, they may go down then. (Congress is considering an extension, SNAP policy experts said, and other changes unrelated to the pandemic — including a regular inflation adjustment, along with a potential change to the basket of food that benefits are based on — could also help offset any potential cuts.)

A number of other temporary changes will remain in many states for several more months.

Those changes increased benefits for the program, which is federally funded but run through the states. Beneficiaries have received emergency allotments, which increased their monthly benefits to the maximum amounts permitted or higher. All told, the average daily benefit per person rose to $7 from $4 by April of this year, according to Ellen Vollinger, legal director at the Food Research & Action Center.

Access to the program also became somewhat easier: Certain college students became eligible, unemployed people under 50 without children weren’t subject to time limits and there were fewer administrative hurdles to remaining enrolled, experts said.

The extra allotments can continue to be paid as long as the federal government has declared a public health emergency, which is likely to remain for at least the rest of the year. But the state administering the benefits must also have an emergency declaration in place, and at least six states — Arkansas, Florida, Idaho, North Dakota, South Dakota and South Carolina — have either ended or will soon begin to pull back that extra amount, according to the Center on Budget and Policy Priorities.

Family and Medical Leave

Legislation requiring employers to provide certain workers with paid time off to handle family and medical issues expired at the end of last year, but other provisions are still in place.

Some workers may still receive paid time off through a pandemic-related incentive that ends at the end of September. The stimulus package passed in March extended tax breaks to certain employers who voluntarily provided workers with paid sick and family leave — taken from April 1 through Sept. 30 — if they needed to take time off because of the virus. It also covers time taken to receive a COVID-19 vaccine, or to recover from any illness or condition related to the shot.

Self-employed workers will also be able to claim paid time off through tax breaks that also expire at the end of September.

Some state and local governments have established their own leave laws, so be sure to check what’s being offered in your area.

Flexible Spending and Dependent Care Accounts

Here, at least, is some good news: You may be able to take advantage of pandemic-related changes well into 2022.

That’s because some rules for these accounts — which use pretax money for health costs that insurance doesn’t cover or dependent care costs for things like elder and child care — are different for this year’s plans, which run for 12 months but didn’t necessarily start in January, depending on your employer.

Usually, these plans can offer only a limited grace period to use money that you didn’t spend during the regular 12-month period. If you don’t use the money, you forfeit it. But in 2021, employers can (although are not required to) offer up to a 12-month grace period for leftover money — or simply let people carry unused amounts to the next year.

Moreover, if your employer allows it, you can also change the amount it is taking out of your paycheck each period — if, for example, you guessed wrong about your needs or wish to boost your set-aside to maximize the $10,500 limit on dependent care account contributions that is that high only this year. You may be able to put money into an account even if you missed the annual enrollment period amid pandemic distractions.

HealthEquity, a benefits administrator, published a plain-English guide with more information.

Internet Service Subsidy

Thanks to one of the recent relief packages, a $50-a-month discount is now available on broadband service (and $75 for people on qualifying tribal lands).

There are two catches: First, you have to be eligible, though the rules are fairly broad. Most low-income people will qualify. So will anyone who lost a job or was furloughed after Feb. 29, 2020; experienced a “substantial” income decline; and had 2020 income below $99,000 for people who filed taxes as a single person and $198,000 for people who filed joint returns.

The second catch is that the subsidy will last only until the nearly $3.2 billion that is available for the program runs out. (You can track the money at a website that the Universal Service Administrative Company maintains.)

So the obvious conclusion is this: Sign up today.

Charitable Donation Tax Deductions

If you’re married and file your taxes jointly and don’t itemize your deductions, you have until the end of the year to avail yourself of a $600 deduction for charitable contributions (though not the sort that you can sometimes deduct when you donate appreciated securities or physical goods). Single filers still get the $300 deduction.

Given how many people may still be struggling as some of the pandemic relief goes away, this lingering opportunity for subsidized altruism can assist others who are losing more than you are.

c.2022 The New York Times Company

This New York Times article was legally licensed through AdvisorStream.

David M. Brenner profile photo

David M. Brenner, ChFC®, CLU®

D. M. Brenner, Inc.
Phone : (858) 345-1001
Schedule a Meeting