Beware the Covid cliff: Here are the CARES Act benefits coming to an end this year

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Tenants in the Harlem neighborhood of New York City hold a demonstration to call attention to their rent strike during the Covid-19 pandemic
Andrew Lichtenstein | Corbis News | Getty Images

Come January, life will get a bit tougher for those already struggling amid the coronavirus pandemic.

Unless more aid comes from the government, several relief measures are set to expire at the end of the year. They include a ban on home evictions, the pause in student loan payments, and unemployment benefits for more than 13 million Americans.

“Americans who have seen their lives and livelihood turn upside down during the pandemic will see their impossible situation become even impossibly worse if Congress fails them and cannot extend critical relief measures,” said Erika L. Moritsugu, vice president for congressional relations/economic justice at the National Partnership for Women & Families.

The need is great, it is immediate, it is urgent and I think we certainly have the capacity to act.
Steny Hoyer
D-Md., House Majority Leader

The federal CARES Act, passed in March, was meant to provide temporary relief to those suffering as a result of the crisis. Already, the additional $600 in unemployment benefits has expired, as has the Trump Administration’s $300 weekly boost, which ran for six weeks starting in August. The ban on foreclosures on federally backed mortgages, initially set to end in August, was extended until at least Dec. 31.

Meanwhile, the stalemate over further relief provisions is ongoing. On Tuesday, lawmakers proposed a $900 billion bipartisan stimulus package, which was swiftly rejected by Senate Majority Leader Mitch McConnell. Democratic leaders have urged McConnell to use the plan as a basis for negotiations.

“The need is great, it is immediate, it is urgent and I think we certainly have the capacity to act,” Democratic House Majority Leader Steny Hoyer, D-Md., said Wednesday.

Here are key relief measures Americans may lose in the “Covid cliff.”

Unemployment insurance

OLIVIER DOULIERY/AFP via Getty Images

In addition to the $600 boost in unemployment, the CARES Act provided two other benefits for those without jobs.

The first program, Pandemic Unemployment Assistance, is aimed at those who typically aren’t eligible for unemployment insurance, such as gig workers, freelancers and the self-employed. Nearly 8.87 million people were collecting the benefit in mid-November, according to data released Thursday by the Department of Labor.

Those who ran through their states’ traditional 26 weeks of unemployment benefits received up to 13 extra weeks through the Pandemic Emergency Unemployment Compensation program. About 4.57 million workers are receiving the aid, according to the Labor Department.

If you are about to lose your unemployment benefits, the best thing to do is be proactive, said Chris Browning, financial analyst and creator and host of the podcast Popcorn Finance.

Don’t wait until the last minute to try to figure out what your financial situation will be, what questions you may have and any help you may need.

“You have to know where you are and not just put your head in the sand,” he said.

You may also have to pick and choose what bills to pay.

“You want to prioritize what debt you can pay back and really focus on prioritizing debt secured by your house, car, and necessities like utilities, student loans and unpaid federal taxes,” said Washington, D.C.-based Leo Tucker, managing partner at Northwestern Mutual.

After that, focus on credit cards and other debt, he added.

If you need money, you still have time to take the emergency withdrawal from your retirement plan. The CARES Act allows those affected by the pandemic to take out up to $100,000 from their 401(k), 403(b) or individual retirement accounts. Like the other provisions, it expires at the end of December.

Another option is taking a loan from a permanent life insurance policy that has accumulated cash, if you have one, Tucker noted. Unlike term insurance, a permanent policy covers you for life. You may also use the policy as possible collateral for a bank loan, he suggested.

Ban on evictions

A banner on a controlled rent building in Washington, D.C., on Aug. 9, 2020.
ERIC BARADAT | AFP | Getty Images

The CARES Act eviction moratorium expired in July. In September, the Centers for Disease Control stepped in and made it illegal for landlords to evict most tenants who couldn’t afford to pay their rent. Those protections end Dec. 31.

Despite the ban, evictions have still been happening across the country. Landlords have filed for 151,165 evictions during the pandemic, according to Princeton University’s Eviction Lab.

Still, come Jan. 1, an estimated 6.7 million renter households face the risk of being evicted, according to the Low Income Housing Coalition.

Then there’s the issue of paying back your rent. The CDC moratorium only covers evictions, so renters are still on the hook for the rent they didn’t pay, plus any penalties or interest that may be tacked on.

If you can’t pay up, talk with your landlord about a possible grace period or temporarily reducing your payment.

“There were people maybe not willing to negotiate on rent at the beginning of this but this has gone on for so long, it has become a reality you can’t ignore,” said Browning, who has been hearing stories about landlords more willing to strike agreements now.

The key is to do it early, so you can start to think about alternative plans if an arrangement can’t be reached.

Pause on student loan payments

ROBYN BECK | AFP | Getty Images

Those with student loans were given a break on making payments until the end of the year. That means in January, 42 million borrowers will have to start paying up again.

If you can’t afford to make your payments, you have several options, according to Betsy Mayotte, president and founder of the Institute of Student Loan Advisors.

First, look at income-driven repayment plans. As the name suggests, what you pay is determined by the amount of money you make. Unemployment insurance counts towards that income. The balance is forgiven after a set amount of time, typically 20 years to 25 years. If your income is very low, you could end up with a $0 payment.

If you don’t qualify, another option is applying for an unemployment deferment. You don’t even have to be fully out of work, just logging less than 30 hours a week and actively seeking a full-time job, Mayotte said.

If your income is very low and you are receiving some type of government assistance, like food stamps, you can apply for an economic hardship deferment.

A last resort is forbearance, Mayotte said. Interest occurs on the loans and if you can’t pay that interest, it ends up getting added to the principal.

Whatever you decide, you’ll have to have patience since millions of people will be entering repayment at the same time, she said.

“Borrowers should be planning ahead,” she said. “If they think they need that type of relief, they should be filing their paperwork now.”

Paid sick leave

Up to 60.5 million private sector workers are set to lose access to emergency paid leave at the end of the month, according to the Center for American Progress, a left-leaning think tank.

The leave was enacted in the Families First Coronavirus Response Act, which required certain employers to provide the time off for reasons related to the virus.

When that leave expires, those workers “will be forced to make the impossible choice between going to work and taking care of themselves or a loved one,” said Moritsugu of the National Partnership for Women & Families.

“Congress must extend the critical safety net programs to protect the financial wellbeing and safety of Americans.”

—CNBC’s Greg Iacurci contributed to this report.

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