With the government shutdown continuing into its fourth week, thousands of federal employees are facing their usual pile of monthly bills without their regular paychecks.
Some workers’ most recent paychecks were already missing a few days of pay, but, depending on where they work, they will miss their first full direct deposit on Friday.
Many financial institutions are offering interest-free loans, fee waivers, deferred payments and other forms of temporary relief to help keep workers afloat while the political gridlock drags on.
Some financial institutions already know who you are, and may be proactively providing some assistance in the background. JPMorgan Chase, for example, is refunding service and overdraft fees for customers with direct deposits made by the federal government.
But if you’re on track to miss a payment, or need more help, you’ll need to make the first move (and sometimes provide some kind of proof of where you work). If you’re not a federal employee, don’t call seeking a deal anyway. Customer service agents will probably face high call volumes if the shutdown persists, so let the people with real need get to the front of the line.
Here’s a look at what type of help is available and from whom.
Mortgages and Home Equity Lines of Credit
Many financial institutions are offering a pause on payments known as forbearance, though interest will still continue to accrue. Bank of America, Citigroup, JPMorgan and U.S. Bank, for example, said they would initially provide up to three months of forbearance.
Pennymac, which collects payments from borrowers for a large number of mortgage loans, is also offering forbearance. It requires a conversation with customers so they know how the process works and what options they’ll have when the shutdown ends, like repayment plans or loan modifications.
Each loan investor — like the Department of Veterans Affairs, the Federal Housing Administration, Freddie Mac and Fannie Mae — has its own guidelines around forbearance. Once a homeowner seeking forbearance contacts the loan’s servicer, the servicer will check these guidelines and walk the homeowner through the options.
Forbearance or other types of deferred payment won’t hurt your credit standing, according to the Consumer Data Industry Association, a trade group for the credit bureaus. But if your balances begin to mount, that could pose a drag on your score.
Auto Loans
Bank of America, Capital One and JPMorgan will allow customers to defer payments for up to one month, with no late fees or additional penalties, which will not be negatively reported to the credit bureaus. Interest will continue to accrue.
Ally Financial, one of the nation’s largest lenders, did not respond to requests for comment.
Credit Cards
Bank of America, Capital One, Citi, and JPMorgan said they would waive late fees and allow customers to defer minimum payments, though interest would continue to accrue. Most banks are letting workers skip one month (without being considered late), and will re-evaluate their policies if the shutdown persists.
Student Loans
Workers can request forbearance through their federal student loan servicer to postpone payments. (You won’t accrue credit toward Public Service Loan Forgiveness while payments are paused, though you may be able to “buy back” that time later, advocates said.)
Federal borrowers might also consider income-driven repayment plans, which tie the monthly payment amount to borrowers’ income and household size, depending on their circumstances. This is probably better for people who have been laid off — when your income drops to zero, so do your payments. But if the drop is only temporary, you may not get the relief you’re seeking.
Mobile Phones
Verizon is offering “payment deferral options,” according to its website. There, it encourages people to request help before allowing a bill to become past due.
AT&T will allow customers to push their payment beyond any due date and has posted additional information on its website.
T-Mobile’s media relations department sent an email, signed “Michelle,” saying, “We always look after our customers, and that’s the same now.” Michelle did not provide more specific information.
Personal Loans
Some financial institutions will let you pause payments on existing loans. Others are going a step further: Many credit unions are extending low-cost loans to their customers, particularly those who use direct deposit.
USAA, open to members of the military, veterans and their families, will provide a no-interest loan equal to one net paycheck, up to $6,000. (The loan generally must be repaid within three months.)
Navy Federal, PenFed, Coastal1, Altura, and the Congressional and U.S. Senate Federal Credit Unions, among others, are offering similar programs. And for those who are required to work without pay, the Maryland Labor Department is offering no-interest loans of $700 that must be repaid in 45 days after the shutdown ends.
Eligibility requirements and repayment terms will vary — and some no-interest periods expire — so be sure to read those details carefully.
U.S. Bank is offering customers what it calls a Simple Loan, but it comes at a cost: It provides up to $1,000 for a $6 fee for each $100 borrowed. If you borrow $400, you’ll pay a $24 fee — that means the total borrowing cost, when translated by U.S. Bank into an annual percentage rate, is nearly 36 percent, exceeding what many credit cards charge.
Other Things to Know
Am I eligible for unemployment insurance?
Potentially. If you’re a furloughed federal worker, you can apply for Unemployment Compensation for Federal Employees, a program specifically for federal workers, while federal contractors can apply for regular unemployment insurance. Workers should apply through the state where they work.
But since employees are likely to receive back pay, they’ll need to pay the money back. Federal employees who are still working — but not being paid — are not eligible.
States are supposed to pay benefits within two to three weeks, but they may have trouble performing routine verification checks because of the shutdown. If the process is lagging, workers should ask to file an affidavit with the unemployment office, using a form called ETA-935, said Michele Evermore, a senior fellow at the National Academy of Social Insurance.
How will all of this affect my credit? Is there anything I can do?
Contacting your providers and getting into forbearance or a deferred payment plan is the best way to avoid damaging your credit score. Those measures alone won’t hurt your credit profile, though rising balances could pose a minor temporary drag — but not nearly as large as a hit from a missed payment.
The three major credit bureaus — Equifax, Experian and TransUnion — will allow you to add a short note to your credit report explaining your circumstances, which lenders will see when they pull your file. The notes can be added directly through the bureaus’ websites.
It may be wise to pull copies of your credit reports as soon as possible so you’ll have a point of comparison if this situation persists. The best place to pull your reports is at annualcreditreport.com; you can try to find a free score through one of your existing providers.
Are there other helpful resources?
The American Bankers Association has compiled a list of institutions and how to contact them on its website, and Senator Bernie Sanders has a list of additional resources on his website, too.
Tara Siegel Bernard writes about personal finance for The Times, from saving for college to paying for retirement and everything in between.
Ron Lieber has been the Your Money columnist since 2008 and has written five books, most recently “The Price You Pay for College.”
The post How Federal Workers Can Find Financial Assistance as Shutdown Drags On appeared first on New York Times.
