If you’re one of the millions of people who have struggled financially during the COVID-19 pandemic, it’s important to know that help is available and more may be coming. Here is a brief overview.
- You may be eligible for additional government assistance, depending on whether the Congress passes a new coronavirus relief package.
- The Paycheck Protection Act (PPP) for businesses has already been extended to March 31, 2021.
- Many lenders are also offering help to their borrowers, but you have to ask for it.
Financial Help From the Government
The U.S. Congress passed several bills to address the financial fallout of the COVID-19 crisis. First off was the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed in March 2020. The CARES Act included a direct $1,200 payment for families and the Paycheck Protection Program (PPP) program for affected businesses.
An additional direct stimulus payment was included in the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, which was signed into law in December 2020.
The PPP was reopened on Jan. 11, 2021 and will be accepting applications until March 31. The U.S. Small Business Administration explains the application process on its website.
The government has also extended its deferment of repayments on most federal student loans through at least Sept. 30, 2021.
In January 2021, President Joe Biden proposed the American Rescue Plan. It has a variety of initiatives intended to help people and businesses financially, including an additional $1,400 direct stimulus payment, an extension of unemployment benefits, and a continuance of eviction and foreclosure moratoriums through March 31, 2021. The plan has not yet been passed into law but is near the top of the new administration's legislative agenda, though student loan payment deferments and eviction and foreclosure forbearance measures were extended through executive action.
Financial Help From Your Lenders
Just about every lender—credit card companies, mortgage lenders, student loan servicers, and others— has been offering some sort of assistance for their borrowers who have been affected by COVID-19. That may take the form of deferred payments, waived interest and fees, or additional help in qualifying for personal or small business loans.
If you are struggling financially, it’s always better to reach out to your lenders as soon as possible, rather than fall behind on payments without contacting them.
Another option might be taking out a personal loan or small-business loan. These should be used primarily as a last resort and only if you have a realistic belief that your situation will be markedly better before too long. Otherwise you run the risk of getting into even deeper debt trouble.
Financial Help From Yourself
Instead of, or in addition to, financial help from the government or your lenders, you may have some do-it-yourself options.
One would be a 401(k) loan or hardship withdrawal if you have a significant balance in your account. In general it's best to avoid touching your 401(k) before retirement, but in a serious financial crisis it might be your only option. The CARES Act changed the rules on 401(k) loans and withdrawals to make them less punitive, such as waiving early distribution penalties and allowing account holders to delay making loan repayments. Those provisions ended on Dec. 31, 2020, but something similar could be revived in a future stimulus package.
On a more everyday level, you might also take another look at your spending to see if there's anywhere you could still cut back or any major expense you might put off, at least for the time being.