MyTwoCents: 'My debt is now starting to scare me, and it’s only getting worse'
Start looking for new work. Pretty much anything will be better than trying to live off of $250 a week in New York.
My debt is now starting to scare me, and it’s only getting worse. I consolidated my student loans a few years ago, so it’s a private lender and isn’t offering forbearance or anything (I still owe about $30,000, last time I checked). My former employer is still in bad shape, so I have no idea when I’ll get a new job or my old one back. And I know that by the end of July, my unemployment checks will go down to $250 a week, in which case I’ll be totally screwed.
I’m starting to panic. I’ve been paying the minimums on my credit card bills, but that barely even covers the interest (I think the APR is 17 percent). And the interest rate on my student loans is 8 percent. I lie awake at night thinking about how my debt is growing every day. I’ve read that banks and lenders are supposed to be helping people in my situation, but I’m worried about asking for help. Is there anything I can do to dig myself out of this or at least put myself in a better position to recover financially when I get a job again?
Debt is especially confounding right now, when it’s impossible to plan for anything. How can any of us trust conventional wisdom about finances when disaster has become normal and aid is promised but arbitrarily delivered? When some people get a break and others don’t? I don’t know, honestly. You’re in crisis mode for reasons outside your control, so it’s understandable that you feel powerless. What’s most important is to keep yourself safe and plot out small and realistic steps for getting through this.
According to the debt experts I spoke to, you have three main objectives: You want to keep your credit score as good as it can be. You want to stockpile some cash in case you don’t get a new job before your unemployment benefits shrink. And you want to prevent your debt from growing as much as possible. Unfortunately, these three things are somewhat at odds with each other. So this will be a bit of a tightrope walk.
First off, don’t wait for your former employer to rehire you. Start looking for new work now. You probably won’t find jobs you want, but pretty much anything will be better than trying to live off of $250 a week in New York. Remind yourself that it’ll be temporary. The goal is to tread water until something better — ideally, your old job, or one like it — opens back up.
Secondly, look into cheaper health insurance. Losing your job qualifies you to sign up for a new plan through your state’s health-care marketplace, and you should be able to shave off a few hundred dollars at the very least.While you’re at it (and sorry to state the obvious), take a hard look at where your money is going. I’m sure you’re already on a bare-bones budget, but anything you can save will be helpful. Personally, I write down every dollar I spend using the Notes app on my phone. It sounds nuts, I know, but it gives me a sense of control when I’m scattered and anxious, and it helps me see what I can cut. You should also try calling your landlord to see if you can get a break on rent. And if you have an opportunity to move someplace cheaper (safely!), take it.
And so, your credit card. Under normal circumstances, you want to avoid racking up consumer debt at all costs. But these are not normal times. And an important thing to know is that a lot of credit card companies are currently reducing their customers’ credit limits without warning. “If you have a credit card limit of $10,000, there’s no reason to expect that it won’t be $8,000 next week,” says Michael Sullivan, the director of education for Take Charge America, a nonprofit credit and student loan counseling agency. “When things are uncertain, banks cut back on risk by reducing lines of credit. And the people who lose out are often people who need credit the most.”
For that reason — and it pains me to say this — Sullivan recommends that you keep putting your expenses on your credit card while you scrape together some cash. “If you have credit, use it now, because you don’t know when it might dry up,” he says. “If you have no income or a very limited income, you need to conserve every dollar.” To be clear: Running up a credit card bill to save cash is normally a very bad idea! Credit card debt is expensive and hard to get rid of. But as a short-term, emergency stopgap, this might be your smartest option in case your credit and your unemployment run out soon. (Congress might extend the CARES Act’s special unemployment benefits, but no one should bet on it.)
In the meantime, continue to make your minimum payments on time so that your credit score doesn’t take a hit. If, at some point, making those payments becomes untenable, then call the phone number on the back of your credit card and request assistance. It’ll be awkward, but be patient — you’re asking for a favor. I recommend making a script beforehand so that you stay calm and focused. Try something like: “I was laid off due to the coronavirus and my income has been severely impacted. I don’t know when I’ll be able to go back to work, and I don’t want to fall behind on my payments. I want to do the right thing. Would it be possible to set up an alternative payment plan or a deferment plan?” You may need to request to speak to the person’s supervisor, but be persistent — they’re being flooded with these types of calls.
It’s reasonable to expect your lender to offer you a special hardship plan that waives penalty fees for late payments for a few months, says Bruce McClary, a spokesperson for the National Foundation for Credit Counseling. “Some creditors are offering plans that give you two consecutive months to skip a payment. Other creditors may offer deferment one month at a time, with the requirement that you revisit the issue every 30 days and have a discussion with them. It depends on the credit card company, but generally the programs allow you to skip a payment without penalty, or reporting it to your credit bureau, or sending your account into debt collection.” The bad news is that they’ll probably keep charging you interest on what you owe, but at least you’ll be in a better position to tackle that debt later if your credit score is okay. Also bear in mind that going on a forbearance plan will probably mean that you can’t use your credit card anymore, so time it carefully.
As for your student loans: You should absolutely call and request help. “Many private student-loan lenders are offering more flexible hardship programs during this time,” says Kimberly Palmer, a debt expert with NerdWallet. Just like with your credit card company, your lender probably won’t stop charging you interest, but they should be able to put you on a plan that won’t penalize you if you skip payments for three or four months. This also shouldn’t impact your credit score if you stick to the agreement.
None of this will be solved with a single phone call. You may have to call every day for a week before you talk to someone who can actually help you. Hang in there.Ideally, taking these steps will keep your credit score decent and allow you to save up a little bit of cash. Your debt won’t look pretty, and as soon as you’re making a regular paycheck again, you should tackle it aggressively, starting with your credit card. Palmer recommends applying for a zero-interest credit card that allows you to roll over at least some of your existing debt, so that you can try to kill it off as quickly as possible. This will be your financial priority for a while.
You might also consider seeking help from a credit counselor through a nonprofit like National Foundation for Credit Counseling. Some agencies are offering free help for people suffering from the COVID-19 crisis; avoid for-profit credit counselors who try to charge you fees for things you can do yourself. Here’s a helpful guide to choosing a good counselor, and what to expect during the process.
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A majority U.S. House of Representatives lawmakers signed a letter made public on Monday calling for a six-month extension of a $32 billion payroll aid program that they argue is crucial to keeping hundreds of thousands of aviation workers employed through March 31.
I don't know if still available - but perhaps a Tracer job might help in meantime - it's going to be a very very tough year in NYC economically. You mean - when you do your kitchen economics - you don’t add - Free Money - like Corps to your budget . Should have been born wealthy- this government- then would give you more free money , to ease your pain . In other words- USA says -“ Die & do it quietly.”
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