Emily Patton is an occupational therapist for children who work with children who face various developmental challenges, including autism, cerebral palsy and attention deficit disorder.
Like many service providers, her work has dried up as companies close their doors and millions of Americans protect on the spot in the middle of the coronavirus pandemic.
And like many such professionals, Patton, 27, is saddled with a huge debt with his student loan – about $ 120,000, which requires a monthly payment of $ 1,100.
The Culver City resident must also pony up $ 1,600 per month in rent and $ 250 for her monthly car payment and then cover the basic cost of daily living.
“It’s more than overwhelming – it’s all consuming,” Patton told me, her voice breaking. “I was lying in bed at night wondering how to do it.”
She’s not alone. From student loans and mortgage payments to credit card bills and rent checks, consumers may face the most precarious time in their lives that ends.
Many lenders, loan servicers and other companies are stepping up and announcing measures – or the opportunity for action – to ease people’s financial burden and help them through this extraordinary event.
But it remains to be seen whether these declarations of goodwill are sincere efforts to share the pain or if in some cases they are merely empty words.
“We are in an unprecedented time,” said Robert Broeksmit, CEO of Mortgage Bankers Assn. “Borrowers are facing difficult economic times through no fault of their own.”
Andrew Winton, an economics professor at the University of Minnesota, said that many consumers’ financial futures depend almost entirely on how much flexibility lenders are now prepared to show.
“It can get ugly,” he said.
Student loans are especially troublesome for many people. The total outstanding balance of such loans across the country tops $ 1.7 trillion – a larger amount than is required for credit cards or car loans.
Nearly one-third of student loans are borne by borrowers, according to government figures. About 1.2 million people went standard last year, up 14% from the previous year.
President Trump announced earlier this month that the government would relinquish interest on federal student loans through the pandemic. Education Secretary Betsy DeVos said that borrowers can pause their bills for at least 60 days in a “coronavirus endurance.”
“These are troubled times, especially for students and families whose education, career and life have been disrupted,” she said. “Right now everyone should be focused on staying safe and healthy and not worrying about the student loan balance growing.”
However, keep in mind that persistence simply means paying out the necessary payments until later, including interest. It’s not a prison-free card.
If the pandemic ends but you are at work, you will still have trouble paying. For many people with student loans, therefore, the administration only delays the inevitable.
The Democrats this week suggested canceling $ 30,000 in student debt for each borrower, but that idea mainly ran into a brick wall of Republican opposition.
For mortgage payments, Fannie Mae and Freddie Mac were instructed by the federal government to cancel all foreclosure measures and evictions for at least 60 days. The closure applies to about 50% of homeowners with a loan supported by Fannie or Freddie.
The agencies also said they will provide borrowers for borrowers for up to 12 months.
California Gavin Newsom approved cities and counties throughout the country temporarily stop foreclosures until May 31. “Over the next few weeks, everyone has to make the sacrifices – but a place to live should not be one of them,” he said.
Newsom announced Wednesday that several major banks and financial institutions have agreed to delay foreclosures and provide mortgage loans to California homeowners.
If you have trouble paying, all experts agree: Do not hesitate to contact your lender. Most banks have expressed an interest in protecting borrowers from defaults.
It is not altruism. Financial institutions are still smart from the recent recession. They have learned that it is much better to help clients through emergencies than having a mountain of foreclosed properties in their books.
Ally Bank said it’s coming postpone mortgages for up to 120 days. American Bank, Wells Fargo, hunt and other major lenders have urged distressed borrowers to get in touch directly and see what options are available.
“Private lending has become very personal versus transactional,” says Eddie Wilson, CEO of American Assn. by private lenders. “Each deal is viewed individually.”
Specifically ask if any endurance or other payment delays will affect your credit score. Many lenders have said they will not report missed payments to credit companies during the pandemic, so your score should remain intact.
Landlords, meanwhile, may be cool to deal with tenants financial difficulties, or they may not be.
The Federal Housing Finance Agency said this week that Fannie Mae and Freddie Mac will grant mortgages to multifamily property owners in exchange for shutting down tenants.
If your landlord is open for negotiation, ask if a temporary reduction in your monthly rent is possible or if a payment plan can be drawn up.
It goes without saying that if you have been a good tenant, you will have more leverage in any such discussion. Many landlords prefer to keep a good tenant in place on more satisfactory terms than before the uncertainty of getting a new tenant.
Los Angeles has provided tenants up to six months to cover any missed payments before ejectment is possible.
Also be proactive with your credit cards, especially if it looks like you will miss a payment. Most of the major card issuers have said that they are ready to help by waiving late fees and extending the due date.
Go ahead and ask for a lower interest rate or higher credit limit. You never know.
Ruth Susswein, Deputy Director of National Priorities for the Consumer Action Advocacy Group, said she was encouraged by the signals so far provided by financial companies.
“Right now, everyone looks like they’re helping,” she said. “It’s good, as long as they really help.”
Susswein said there is an awareness among most lenders that this is not like the recent financial crisis, with many coming to terms with questionable loans. This time, the blame lies on coronavirus.
“What we need to see now,” she said, “is whether this help being offered is legitimate or just a publicity stunt. The jury is still out. “
Pediatrician Patton said that because she refinanced her student loan at First Republic Bank, she is not eligible for the payment transfers announced by the government.
“I reached out to First Republic,” she told me. “They said they are not offering any help at the moment in my situation.”
I also reached out to First Republic. A spokesman said Patton should try again.
“The First Republic will do the right thing,” he insisted.
So Patton called the bank again.
She said she was told that First Republic is still “trying to figure out how to provide relief.”
The jury is still out, in other words.