Congress approved the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020, and it was quickly signed into law. This was the third major response by Congress to the COVID-19 pandemic, and it’s quite possible that Congress will approve further stimulus packages in the months to come.
These federal actions provide relief to businesses and working Americans at every level. How will it help you specifically? We’ve highlighted some important provisions of the federal stimulus package below.
Economic Impact Payments
Most Americans will receive Economic Impact Payments (EIPs) of up to $1,200 per individual, $2,400 per couple and $500 per child under 17 years old. Individuals with income below $75,000 and couples earning less than $150,000 can receive the full EIP amount. The payments phase out with rising income and cease for individual earnings of $99,000 per year ($198,000 for couples).
If you file as head of household, you can get the full $1,200 check when your adjusted gross income doesn’t exceed $112,500 per year. This amount phases out completely for annual incomes above $136,000. Heads of household also receive an extra $500 per child.
Help with School Debt
The CARES Act also includes funds to help federal student loan borrowers suspend monthly payments through September 30, 2020. Any interest accrued during the suspension period is waived.
At PAX Financial Group, we see a lot of student debt in our clients’ budgets. We also have many clients whose children are struggling with school loans.
According to the Federal Reserve Bank of New York, more than 44 million borrowers owed a total $1.48 trillion in student debt in the United States during the second quarter of 2019, with a graduating student having an average of $37,000 in loans!
Needless to say, student loan support is an important part of any package designed to provide relief from the economic difficulties stemming from the Coronavirus pandemic.
Unfortunately, the benefit does not apply to private student loans.
Help with Housing Costs
Housing costs are another large part of most people’s budgets.
If you have a federally insured single-family mortgage loan, you can get up to one year of mortgage forbearance. Servicers of federally insured mortgages can’t start foreclosure or eviction proceeding for at least 60 days beginning March 18, 2020.
If you have a federally insured multi-family rental property mortgage, you cannot evict tenants or charge extra for nonpayment of rent for 120 days beginning March 27, 2020.
The Act also gives HUD $5 billion more for Community Development Block Grants and for housing programs that support vulnerable communities.
With lockdowns and Shelter in Place orders throughout the country, hundreds of thousands of people are filing for unemployment benefits in this state alone, with more expected to be out of work by the summer.
Another benefit to the Coronavirus stimulus package is an additional $260 billion in expanded unemployment benefits. Weekly benefits include an extra $600, bringing the maximum amount to more than $1,000. The benefit period was extended to 39 weeks and now covers freelancers, independent workers, the self-employed and part-time workers.
One new feature: You can receive benefits if you voluntarily leave your job and you have COVID-19 or are caring for someone who does. You also can qualify if you had to leave work to care for children because you lost child care due to the Coronavirus pandemic.
Help for Small Business Owners
The CARES Act also provides $367 billion to help small businesses. The Small Business Administration (SBA) is overseeing the disbursement of these funds. Eligibility for SBA lending programs was significantly expanded. This sum is in addition to $500 billion for direct business loans and guarantees, in which a portion goes to the Federal Reserve to support lending facilities, and another portion goes to cargo and passenger air carriers. The program puts limits on dividends, executive compensation/severance benefits, employment reductions and stock buybacks until one year after loan repayment.
Paycheck Protection Program
Small businesses (those with less than 500 employees), nonprofits, veterans’ organizations, sole proprietors, independent contractors, self-employed individuals and businesses in the accommodation and food services sector can obtain loans under the new $349 billion Paycheck Protection Program (PPP). These loans can be used to cover costs associated with payrolls, mortgage interest payments, health care, rent, utilities and interest on pre-existing debt.
PPP loans are available through June 30, 2020. Loans cannot exceed 2-½ times the average monthly payroll for the prior year and are capped at $10 million per recipient. The loan interest rates cannot exceed 4 percent, and payments can be deferred for six to 12 months.
PPP loans may be forgiven if the recipient does not reduce full-time employment levels. Forgiven amounts may be lowered if total salaries/wages drop by more than 25 percent without rehiring employees. The amount forgiven includes mortgage interest, payroll payments, utility payments and rent payments up to the loan principal.
What You Can Do With What You Get
The purpose of the stimulus bill is to provide funds and support to those who need it now, but this money can also be used to help your future.
For example, while many people will be free from paying their student loans, if you can make the payment, you may want to take advantage of the no interest offer and make larger payments during this time. Or, if you can, it may be wise to invest the EIP check you receive into your retirement accounts. Talk with a financial advisor about the most appropriate options for your situation.
Securing your future is critically important, but the unfortunate fact is that many people spend more time planning a two-week vacation than planning the decades they will likely spend in retirement. Planning is a must if your money is going to be there for you for as long as you’re around to need it.
Financial planning, even taking initial small steps, can help you do a lot more than just ensure your money lasts. When done right, it can help you achieve your big goals in life, whatever those are.
At PAX Financial Group, we are here for you during these difficult times, not only to talk with you but to listen. Contact us if you have any questions. The health and well-being of our clients, our team and our community is our top priority. Stay safe and healthy.
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