Emily Patton is a pediatric occupational therapist, working with kids facing a variety of developmental challenges, including autism, cerebral palsy and attention deficit disorder.
Like many other service providers, her work has dried up as businesses shut their doors and millions of Americans shelter in place amid the coronavirus pandemic.
And like many such professionals, Patton, 27, is saddled with a huge pile of debt resulting from her student loan — about $120,000, requiring a monthly payment of $1,100.
The Culver City resident also has to pony up $1,600 a month in rent and $250 for her monthly car payment, then cover the basic costs of day-to-day life.
“It’s more than overwhelming — it’s all-consuming,” Patton told me, her voice breaking. “I lay in bed at night wondering how I’m going to manage.”
She isn’t alone. From student loans and mortgage payments to credit card bills and rent checks, consumers are facing possibly the most uncertain time of their lives making ends meet.
Many lenders, loan servicers and other businesses are stepping up, announcing measures — or the possibility of measures — to ease people’s financial burdens 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 whether, in some cases, they’re just empty words.
“We are in unprecedented times,” said Robert Broeksmit, chief executive of the Mortgage Bankers Assn. “Borrowers are facing hard economic times through no fault of their own.”
Andrew Winton, a finance professor at the University of Minnesota, said many consumers’ financial futures depend almost entirely on how much flexibility creditors are now prepared to show.
“It could get ugly,” he said.
Student loans are especially troublesome for many people. The total outstanding balance for such loans nationwide tops $1.7 trillion — a bigger amount than what’s owed for credit cards or car loans.
Nearly one-third of student-loan borrowers are behind on their payments, according to government figures. About 1.2 million people went into default last year, up 14% from the year before.
President Trump announced earlier this month that the government would waive interest on federal student loans through the pandemic. Education Secretary Betsy DeVos said borrowers could pause their bills for at least 60 days in a “coronavirus forbearance.”
“These are anxious times, particularly for students and families whose educations, careers and lives have been disrupted,” she said. “Right now, everyone should be focused on staying safe and healthy, not worrying about their student loan balance growing.”
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The stimulus bill passed by the Senate this week would allow people with student loans to put off payments until Sept. 30.
Remember, though, forbearance simply means putting off required payments until later, including interest. It’s not a get-out-of-jail-free card.
If the pandemic ends but you’re out of work, you’re still going to have trouble making payments. For many people with student loans, therefore, the administration is merely delaying the inevitable.
Democrats this week proposed canceling $30,000 in student debt for every borrower, but that idea ran headlong into a brick wall of Republican opposition.
For mortgage payments, Fannie Mae and Freddie Mac were instructed by the federal government to suspend all foreclosure actions and evictions for at least 60 days. The suspension applies to the roughly 50% of homeowners with a loan backed by Fannie or Freddie.
The agencies also said they’ll provide forbearance options to borrowers for up to 12 months.
California Gov. Gavin Newsom authorized cities and counties statewide to temporarily halt foreclosures until May 31. “Over the next few weeks, everyone will have to make sacrifices — but a place to live shouldn’t be one of them,” he said.
Newsom announced Wednesday that several major banks and financial institutions have agreed to delay foreclosures and provide mortgage relief to California homeowners.
If you’re facing trouble making payments, all experts agree: Don’t hesitate to contact your lender. Most banks have expressed an interest in protecting borrowers from default.
It’s not altruism. Financial institutions are still smarting from the last recession. They’ve learned it’s much better to help customers through emergency situations than to have a mountain of foreclosed properties on their books.
Ally Bank said it will defer mortgage payments for up to 120 days. Bank of America, Wells Fargo, Chase and other big lenders have urged distressed borrowers to get in touch immediately and see what options are available.
“Private lending has turned very personal versus transactional,” said Eddie Wilson, CEO of the American Assn. of Private Lenders. “Each deal is looked at individually.”
Ask specifically if any forbearance or other payment delays will affect your credit score. Many lenders have said they won’t report missed payments to credit agencies during the pandemic, so your score should remain intact.
Landlords, meanwhile, may be cool about dealing with renters’ financial hardship, or they may not be.
The Federal Housing Finance Agency said this week that Fannie Mae and Freddie Mac will grant mortgage forbearance to owners of multifamily properties in exchange for suspending evictions of tenants.
If your landlord is open to negotiation, ask whether a temporary reduction in your monthly rent is possible, or whether a payment plan can be worked out.
It goes without saying that if you’ve been a good tenant, you’ll have more leverage in any such discussion. Many landlords would prefer to keep a good tenant in place on more accommodating terms than face the uncertainty of bringing in a new tenant.
Los Angeles has given renters up to six months to cover any missed payments before eviction is possible.
Be proactive as well with your credit cards, especially if it looks like you’re going to miss a payment. Most of the big card issuers have said they’re ready to help by waiving late fees and extending due dates.
Go ahead and ask about obtaining a lower interest rate or higher credit limit. You never know.
Ruth Susswein, deputy director of national priorities for the advocacy group Consumer Action, said she’s encouraged by the signals given so far by financial firms.
“Right now, everyone is looking to appear like they’re helping,” she said. “That’s great, as long as they’re really helping.”
Susswein said there’s an awareness among most lenders that this isn’t like the last financial crisis, in which many people got in over their heads with dubious loans. This time, the blame lies with the coronavirus.
“What we need to see now,” she said, “is whether this help being offered is legitimate or just a PR stunt. The jury’s still out.”
Patton, the pediatric therapist, said that because she refinanced her student loan with First Republic Bank, she doesn’t qualify for the payment forbearance announced by the government.
“I reached out to First Republic,” she told me. “They said they’re not offering any help at the moment to people in my situation.”
I too reached out to First Republic. A spokesman said Patton should try again.
“First Republic is going to do the right thing,” he insisted.
So Patton called the bank one more time.
She said she was told that First Republic is still “trying to figure out how we are going to provide relief.”
The jury’s still out, in other words.