Paycheck Protection Program – The COVID-19 pandemic has caused many businesses to close their doors temporarily. Many workers were laid off as a result… and some businesses had to shut down completely.
As a result, the federal government has decided to partner with the Small Business Association (SBA) to help keep small businesses afloat.
The idea? A loan to help keep workers on the payroll so workers don’t have to go without, and so small businesses don’t have to shut down or lay people off.
What Is The Paycheck Protection Program?
As per the SBA website, the Paycheck Protection Program is a loan made out to small businesses in order to provide an incentive to keep workers on the payroll.
It’s a forgivable loan, but only forgivable on the condition that all workers are kept on the payroll and the money is used on payroll, rent, utilities, or interest on a mortgage. 75% or more of the money must be used on payroll.
The loan has a maturity of 2 years and a 1% APR.
Do You Qualify?
Your business may qualify if it has been affected by COVID-19. That is, if it has been forced to shut down or has seen a drastic decrease in revenue.
The following business structures are eligible:
- Any small business that meets the SBA’s size standards
- Any business, 501(c)(3) nonprofit, 501(c)(19) veterans organization, or Tribal business concern (as per the Small Business Act, 31(b)(2)(c) with less than 500 employees:
- If any of the above businesses that meet the SBA industry size standard (if they have more than 500 employees)
- Any business with a NAICS code beginning with 72 with more than 1 physical location and employs less than 500 per location
- Any sole proprietor, independent contractor, and self-employed person
Check the SBA website about the Paycheck Protection Program. The first round of loans is no longer available, but there are future rounds coming.
The program ends June 30, 2020. So check the website now and see if you’re able to get a small business loan!
Credit Building Tips for Students in 2021
The past year has been one for the history books. Between a pandemic, an economic crash, and a new President of the United States, there hasn’t been a year like 2020 in a very long time.
With that said, 2021 isn’t quite yet back to normal. We still have a long way to go. In the meantime, though, there are still students like you who are trying to get their lives started during an unprecedented time in world history.
Part of starting your life is building up a credit history, and although banks aren’t as fast and loose with money as they were during the 2010s, there are still ways that students can get started with building their credit in 2021.
What Is Credit, And Where Does It Come From?
Credit doesn’t just refer to a 3 digit number, or a credit score. Instead, credit is just the ability to borrow money or use certain goods or services. The idea of an individual having credit dates back to antiquity, where some individuals were seen as more creditworthy than others based on their reputation and their status.
As we started to modernize and more people started to demand access to credit, there was a need for a standard way of judging creditworthiness. The first credit bureau, Retail Credit Company based in Atlanta, was the first company to collect information about people to give to lenders to help them make decisions on who to lend money to.
Over time, more opportunities for lending arose as the American people became more confident in the economy. Mortgage lending grew substantially with the establishment of Fannie Mae in 1938 and with help of the GI Bill in 1944. The GI Bill gave World War 2 veterans the ability to get a mortgage guaranteed by the federal government.
The first credit card was launched in 1950 as a charge card, and slowly the idea of a revolving credit card became much more mainstream. The Fair Credit Reporting Act of 1970 made it illegal to collect information on race, sexuality, and disability which had been used to discriminate against would-be lenders. More credit bureaus began to take form, including TransUnion, Equifax, and Experian (or the big 3 credit bureaus today).
Later, in 1989, the Fair Isaac Corporation (FICO) partnered with the Big 3 credit bureaus to create a 3-digit number to represent creditworthiness, now known as a FICO Score or a credit score.
Why Is Building Credit So Important For Students?
Building credit is important for anyone who wants to have the ability to borrow money to meet their financial goals. Good credit is highly beneficial, and people with good credit are able to get lower interest rates, larger borrowing amounts, and access to more goods and services provided by lenders and card issuers.
The biggest area where having good credit helps is for mortgages. If you want to own a home someday, chances are you’re going to have to take out a mortgage to buy it. A mortgage is debt borrowed in order to purchase a piece of real estate, most commonly used by consumers to purchase single-family homes. In order to get a mortgage, you need to demonstrate ability to pay (which is usually based on your debt-to-income ratio), solvency (based on your debt-to-equity ratio) and creditworthiness (which they check based on your credit history and your credit score).
As a student, you might have a significant amount of student debt. Building good credit can allow you to consolidate or refinance your student loans later, which can help you get lower interest rates and even lower payments. This could help you grow your savings, which can then be used for a down payment on a home after you’ve cleared out your student debt!
How Can A Student Build Credit?
Take advantage of student credit card deals and use your card responsibly.
Students are offered credit cards all the time, and banks use student credit card and banking deals to get new customers. Don’t take the first student credit card that shows up in the mail: do your research. Go to Google and find out which credit card offers provide you with the best terms.
More importantly, you want to use your credit card responsibly. Using a credit card responsibly entails doing the following:
- Use your credit card to pay for things that you CAN afford, not things you CAN’T afford.
- Don’t charge more than 30% of your available balance, if you can help it.
- Don’t miss a payment. Ever. It’s better to pay the minimum payment than to pay nothing at all.
- Pay off your balance in full every month. This allows you to avoid interest charges.
As a student, we highly recommend you avoid putting large purchases on your credit card.
Pay down your student debt while you’re in school.
Many students decide to work while they’re in school in order to help pay for textbooks, living expenses, and entertainment. However, one great way to build credit early is to start making payments toward your student debt while you’re still studying.
You don’t have to put a lot of money toward your debt while in school. Just pay what you can afford. These payments will lower your overall debt burden later in life and will help you build a good credit history even before you graduate.
Learn financial discipline habits early.
Financial discipline is one of those things that’s based not on laziness or morality, but on habit. People with good financial discipline have the habits necessary to keep themselves above water, even during difficult times. It’s their habits that allow them to withstand times of reduced income.
Good financial habits include:
- Setting aside money for savings every month.
- Keeping a living budget by keeping track of expenses as they compare to income.
- Paying off credit cards in full each month.
- Avoiding unnecessary consumer debt.
- Keeping track of credit card transactions and spending.
If you don’t have an income, you won’t be able to pay off large credit card bills or save money. Instead, keep track of your spending and come up with ways to reduce it.
Learn more about good financial discipline habits!
What You Need to Know About Renter’s Assistance in 2021
COVID-19 and the ensuing lockdowns have caused millions of Americans to lose their incomes. They’ve lost jobs, businesses, and self-employment contracts, and this has caused a great deal of economic instability in some households.
Landlords have been unable to evict people since March 2020, causing them to lose out on rental income as well. In order to make sure that people can continue to pay their rent regardless of their income situation, the Emergency Rental Assistance Program was launched by the U.S. Department of the Treasury on January 5, 2021.
So what is the Emergency Rental Assistance program, and how can it help both renters and landlords stave off homelessness and eviction?
History of COVID-19 Relief in the USA
On March 21, 2020, then-President Donald Trump signed the CARES Act into law. This act launched one of the largest stimulus packages in US history and provided vast amounts of aid to prevent a full blown economic crash. Federal student loan payments were postponed, unemployment benefits were expanded, small businesses were given relief funds to help keep workers on their payroll, and evictions and foreclosures were put on a temporary hold.
The provisions outlined the CARES act have since been expanded by acts signed into law in August and in December. On December 27, 2021, the Consolidated Appropriations Act was signed into law and included the provisions for the Emergency Rental Assistance Program.
What Is The Emergency Rental Assistance Program (ERAP)?
The Emergency Rental Assistance Program is a $25 billion provision to help renters pay their rent and boost revenue for landlords who are unable to evict non-paying tenants. Applications can be made and submitted by either an eligible household or a landlord applying on behalf of an eligible household that is renting their property.
This $25 billion was split amongst the 50 states, Native American tribal communities, the District of Columbia, and the following US territories: American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and the US Virgin Islands.
Who Qualifies for The Emergency Rental Assistance Program?
In order to qualify for the program, you must be an eligible household or a landlord applying on behalf of an eligible household. In order to be classified as an eligible household, a household must:
- Be renting their primary residence
- Qualify for unemployment OR has experienced a reduction in household income, incurred significant expenses, or otherwise experienced financial hardship due to the pandemic;
- Be at risk of homelessness or housing instability; and
- Have a household income =>80% of the media income of the area that they’re applying from.
ERAP provisions are not to be provided in addition to any other federal rental assistance.
To determine household income, one of the following approaches may be used:
- You can take your total income in 2020, or
- You can take your monthly income at the time of applying
If you decide to determine your income based on monthly income, your eligibility must be reassessed every 3 months. How it’s done will be left up to the grantee that provides you assistance.
Renter households are ineligible if they receive a monthly federal subsidy, such as a Housing Choice Voucher, Public Housing, or Project-Based Rental Assistance AND the rent charged to the tenant is adjusted based on income.
What Can I Get From The Emergency Rental Assistance Program?
If you’re an eligible household, you can receive up to 12 months of assistance, plus an extra 3 months of assistance if your local government determines that you need the additional assistance to prevent homelessness. This only applies if the funds are available.
You can receive assistance for the following expenses:
- Rent charged by the landlord
- Utilities (electricity, gas, water and sewer, trash removal, and additional energy costs)
- Other housing-related expenses
Telecommunications such as phone and Internet are NOT eligible to be paid for by the ERAP.
You can get assistance to help pay outstanding rental arrears that would otherwise result in eviction. This measure is to help landlords replace lost income. Funds for this purpose are to be prioritized. However, this only applies to rental arrears accrued after March 13, 2020.
The amount of assistance you will receive will depend on several factors. The first factor is the grantee that’s providing the funds. The second factor is how much you need to cover your rent and utility expenses.
Assistance is only available for as long as there is funding. Renters that are facing imminent homelessness and those who are up for eviction if they cannot meet their rent payments will be prioritized.
How Do I Apply For Emergency Rental Assistance?
To apply for this program, you will need to contact your local government to figure out who to talk to. Unfortunately, not all states have accepted aid yet and assistance may arrive later than expected.
Currently, the best way to find out if you’re able to get assistance from the ERAP is to go to the United Way’s 211 website, https://211.org. They’re currently the best resource available for finding out what help is available to you.
What You Need to Know
One of the major concerns of the December 2020 stimulus bill was that federal student loan forbearance was not slated to be extended. Many Americans, some of whom are out of work, still have federal student loan balances and some were concerned that they would be unable to make payments toward those loans.
Luckily for these Americans, President Biden has agreed to extend student loan forbearance until September 30, 2021. The Education Department agreed to this action on January 20, President Biden’s first day in office. This policy affects 41 million Americans who have outstanding federal student loan balances, either for themselves or for their children.
So what is this student loan forbearance, what loans does it affect, and what can borrowers do in the meantime?
What Is Student Loan Forbearance?
Since the CARES Act was signed into law in March 2020, federal student loans have been put into a state of forbearance. Forbearance means that payment obligations have been deferred to a later date. Essentially, it means that borrowers do not have to make the otherwise-scheduled payments toward their federal student loan debt.
This forbearance is different than most other types of student loan forbearance, as student loan interest will not accrue during the forbearance period. This means that you will not have a larger balance than what you started with. Not only that, but federal student loans that are in default will not be collected.
Why Did Federal Student Loans Go Into Forbearance?
The CARES Act (March 2020) signed into law by then-President Donald Trump was introduced to allocate spending and debt relief for American citizens during the COVID-19 pandemic. Originally, loans were supposed to remain in forbearance for six months; however the forbearance period was extended twice. The first extension lasted until January 31, 2021, and the second extension will last until September 30, 2021.
This student loan forbearance extension was agreed upon by President Biden and the US Education Department in order to provide relief to people who are still out of work. Since the pandemic and the subsequent lockdowns have lasted all throughout 2020 and threaten to continue well into 2021, the Biden administration wanted to make sure that those who were still out of work are able to afford basic necessities.
Which Loans Count for Forbearance?
Federal student loans, which includes both subsidized and unsubsidized loans as well as Direct PLUS loans (including Parent PLUS and Grad PLUS) are all eligible for the forbearance period.
Student loans provided by a lender that is not the US Federal Government will not be eligible for this forbearance period. These loans have been continuing to accrue interest and payments have continued to be due. This will not change with the extension of the federal student loan forbearance period.
What To Do About Private Student Loans
Just as in the original moratorium on student loan payments and interest, student loans issued by private lenders such as Sallie Mae do not qualify for this type of forbearance. Private student loan borrowers are still responsible for their private loan payments.
However, many private student loan borrowers are having just as much trouble affording their payments due to being out of work or having their income reduced as a result of the pandemic.
If you are having trouble paying down your private student loans, you have options available to you. Call your lender or visit your lender’s website to see what options are available. Whatever you do, do NOT miss a payment on purpose and do NOT default on your loan if at all possible!
Here are some potential options you may have:
Negotiate lower payments
You may be able to temporarily arrange lower payments during the pandemic if you’re unable to afford your normal payment amount. Lenders would rather get something than nothing, and they’re usually more than happy to assist you.
Some student loan providers offer income-based repayment plans, which are usually temporary. This is not the same as the FSA’s income-driven repayment plans.
Private student loan providers offer temporary forbearance which can be used in case you are unable to make the payments on your student loans. These providers have made arrangements with borrowers who are affected by the pandemic.
However, there may be limits to how long you can keep your loans in forbearance. Make sure to ask your student loan provider about the forbearance terms.
Consolidation or refinancing for a lower payment
Some private lenders offer loan consolidation, however if you do want to consolidate your private student loans, you may want to shop around for the best rate. SoFi Financial, LendKey, and Splash Financial are examples of lenders that specialize in consolidating and refinancing private student loans.
Should I Pay Down My Federal Student Loan Debt In The Meantime?
The answer is yes, but only if you can afford to do so. This reprieve is for student loan borrowers who are having trouble allocating funds toward normal expenses. Borrowers who are no longer responsible for student loan payments no longer have to worry about making payments until October, and can use whatever funds they have toward their necessary expenses.
On the other hand, if you can afford to pay down your federal student loan debt during this time, you absolutely should! During the forbearance period, your student loan debt will not be accruing interest and payments made will count toward the principal. For those who are not out of work, this is a good time to catch up on paying down that debt.
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