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With unemployment levels rising and many employers cutting work hours, lots of college grads are now struggling to meet their student loan payments. Thankfully, the federal government has passed legislation to ease this burden. Unfortunately, though, many borrowers are confused about the terms and conditions of these changes.
Here’s all you need to know about the changes to student loan debt during the coronavirus pandemic.
All federal student loan payments are automatically suspended for six months
As part of The Coronavirus Aid, Relief and Economic Security Act (the CARES Act) signed into law on March 27 all federal student loan payments are suspended, interest-free, through Sept. 30, 2020. If borrowers continue making payments, the full amount will be applied to the principal of the loan. The suspension applies to all federal student loans owned by the Department of Education as well as some Federal Family Education Loans (FFEL) and some Perkins loans. Students do not have to take any action or pay any fees for the suspension to take effect.
Additionally, during the suspension period, the CARES Act does not allow student loan servicers to report to the credit bureaus borrower nonpayments as missed payments. Therefore, the suspension should not have a negative effect on borrowers’ credit scores.
If you’re not sure whether your student loan is federally owned, you can look it up on the Federal Student Aid (FSA) website. Be sure to have your FSA ID handy so you can sign in and look up your loans. You can also call your loan servicer directly to clear up any confusion.
Here is the contact information for federal student loan servicers:
FedLoan Servicing (PHEAA): 1-800-699-2908
Granite State — GSMR: 1-888-556-0022
Great Lakes Educational Loan Services, Inc.: 1-800-236-4300
OSLA Servicing: 1-866-264-9762
Public Service Loan Forgiveness (PSLF) is a federal program allowing borrowers to have their student loans forgiven, tax-free, with the stipulation that they work in the public sector and make 120 qualifying monthly payments. A disruption of these 120 payments can disqualify a borrower from the program.
According to the CARES Act, suspended payments will be treated as regular payments toward PSLF. This ensures that borrowers who have been working toward these programs will not lose the progress they’ve made toward loan forgiveness.
The same rule applies to individuals participating in student loan rehabilitation, during which borrowers with defaulted student loans must make nine out of 10 consecutive monthly payments to pull their loans out of default. The U.S. Department of Education will consider the six-month suspension on payments as if regular payments were made toward rehabilitation.
If your student loan is not federally owned and you are struggling to meet your payments, there may still be options available, such as loan deferment or forbearance. If you are in need of such assistance, contact your lender directly to discuss your options.
If you have an FFEL that is ineligible for suspension, you can lower your monthly payments by enrolling in an income-based repayment plan, which adjusts your monthly student loan payment amount according to your discretionary income. Other lenders offer similar plans, often referred to as income-driven repayment plans. If your salary was cut as a result of COVID-19, or you are currently unemployed, these plans can provide relief by making your monthly payments more manageable.
The federal government offered temporary tax relief for employers contributing up to $5,350 toward their employees’ student loan payments. This benefit is in effect until Jan. 1, 2021 and it can be used for any kind of student debt, whether federal or private.
If you don’t qualify for the student loan payment suspension, you can try speaking with the human resources department at your workplace to find out how they can help you with your student loan debt at this time.
Q: I’m ready to start saving for my retirement, but the choices are so confusing! I’m also wondering about the recent changes made to Individual Retirement Account (IRA) products through the SECURE and CARES acts. How do I choose the IRA that’s right for me, and what do I need to know?
A: It’s commendable that you’ve started thinking about your retirement planning. There are important distinctions between each type of IRA, so it’s best to review them before making your choice. There have also been several recent changes to the structure and limitations of IRAs with the passing of the Setting Every Community Up for Retirement Enhancement (SECURE) Act in December 2019 and the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020.
This comprehensive guide to Individual Retirement Accounts, complete with updated information on the recent changes, can help you choose the option that best suits your needs.
Traditional IRAs are the most straightforward retirement accounts. Contributions are never taxed. Depending on eligibility, they may even be tax-deductible while significantly lowering your taxable income. Investment earnings aren’t taxed and there are no income limits for contributors.
The downside of traditional IRAs comes after contributions are made. All withdrawals made from a traditional IRA during retirement will be taxed at the going tax rate at that time.
Traditional IRAs are great for individuals who are currently in a higher tax bracket and anticipate being in a lower one during retirement. They’re also a good choice for employees who do not have access to a workplace-sponsored retirement plan.
Roth IRAs are similar to their traditional counterparts, but have several notable differences. All contributions and growth are subject to taxes and are not tax-deductible; however, account holders can withdraw their money, tax-free, at retirement, as long as they are age 59 1/2 or older and have had the account for 5 years or longer.
There is also no age limit for contributions, though there are income and contribution limits for eligible contributors. A Roth IRA is a good choice for individuals who anticipate being in a higher tax bracket during retirement and for those who may need to access some of their savings before retiring.
Simplified Employee Pension (SEP) IRAs are designed for individuals who have been employed in their place of work for at least three of the past five years. Contributions are made by the employer and are subject to a maximum amount. Earnings can grow tax-free and the account provides tax benefits for the employer. The annual contribution limits are higher than the limits for traditional IRAs, but are subject to fluctuation along with the business’s cash flow. Also, there are no catch-up contributions allowed for workers who are 50 years old and over.
A SEP IRA can be a good choice for small business owners wanting to avoid the heavy startup and maintenance costs that are commonly associated with conventional retirement plans.
Up until the passing of the SECURE Act, the limit for SEP IRAs was capped at 25% of an employee’s salary or up to $56,000, whichever is less. Now, that limit has been increased to $57,000.
A SIMPLE IRA, or a Savings Incentive Match Plan for Employees, functions similarly to a SEP IRA with the distinction that both employees and employers can make contributions. Eligibility requirements are forgiving, with employees who have earned at least $5,000 from the company opening the plan, and who expect to earn at least that amount in the current calendar year, being eligible to participate.
The contribution limit for SIMPLE IRAs was $13,000, with a catch-up limit of $3,000 until the passing of the SECURE Act, which increased the limit to $13,500. The legislation also established a new tax credit of up to $500 a year for businesses establishing a SIMPLE IRA with automatic enrollment. This credit is on top of the startup credit that is already available. Employers converting an existing plan to one with Eligible Automatic Contribution Arrangements (EACA) are also eligible for the $500 tax credit.
A Spousal IRA can be a traditional or Roth IRA and is designed for married couples where one spouse isn’t eligible for a traditional retirement account. Couples must file a joint tax return to be eligible and the account must be opened in the non-working spouse’s name. Contribution limits are determined by the working spouse’s income.
The SECURE Act made several significant changes for all IRAs:
RMD changes: IRAs have rules in place for required minimum distributions (RMDs), or a predetermined time when account holders must begin taking distributions. Up until Dec. 20, 2019, all holders of IRAs were no longer allowed to make contributions, and were required to begin taking distributions when they reached age 70 ½, irrespective of their employment status at the time. With the passing of the SECURE Act in December 2019, the age for RMDs increased to 72 years. Also as part of the SECURE Act, IRA holders can now continue making contributions indefinitely, as long as they can demonstrate earned income.
Changes for workplace retirement plans: Previously, employers were allowed to exclude employees who worked fewer than 1,000 hours per year from all retirement plans. With the passing of the SECURE Act, employees who work at least 500 hours in three consecutive years, and are at least age 21 at the end of the three-year period, are eligible to participate in employer retirement plans. This change takes effect in January 2021. Also, small businesses can now team up with other organizations when opening an employer retirement plan, enabling them to provide their employees with access to low-cost plans.
Changes for inherited IRAs: Until the passing of the SECURE Act, non-spousal inheritors of IRAs were allowed to withdraw funds from the account indefinitely. Now, they must empty the account within 10 years.
In March 2020, Congress passed the CARES Act in an effort to mitigate the economic fallout of the coronavirus pandemic. Part of the 300+ page legislation made changes to retirement accounts:
Changes for RMDs: The CARES Act waived all RMD requirements of IRAs for the year 2020.
Special allowances for coronavirus-related withdrawals: The CARES Act provides for expanded distribution options and favorable tax treatment for up to $100,000 of coronavirus-related distributions from eligible retirement plans to qualified individuals who have been adversely affected by COVID-19.
Millions of people have lost their job in the last few weeks due to the national crisis. Perhaps that’s you, and you’re not sure where to start. Here’s a checklist to consider as you look for solutions. Not all of these items may fit your needs, so consider each of them individually for your circumstance.
Apply for unemployment. Each state has a different program. In Colorado, you can apply if your hours or wages reduced, or you were temporarily or permanently laid off. To apply or learn more about Colorado’s program, please go to ColoradoUI.gov.
Defer student loan payments. Federal student loan payments are automatically suspended between 3/13/2020 and 9/30/2020 and no interest will accrue during that time. Go to StudentAid.gov/coronavirus to learn more.
Buy health insurance. Some of you may depend on your employer for health insurance. If your health insurance is no longer available, get insurance. Connect for Health Colorado is running a special enrollment period from March 20 to April 30. Learn more here: https://connectforhealthco.com/
Look for work. Apply for work and ask you family, friends, and professional connections if they have any leads that make sense for you.
Use your emergency savings. Your emergency savings is here for situations like this. If you don’t have emergency savings, and you’re still employed, start a savings account today with automated transfers as a backup for the future.
Ask for help. If you have a loan somewhere (bank or credit union), give them a call and see if they will defer your loan payments. Make sure you understand the details. If it’s a good fit, go for it. Denver Community is deferring loan payments in many cases. Click here to defer a payment.
Ask for help. Family and friends that are well employed may be able to help. Also, there’s no shame in using community resources such as food pantries to help you scrape by until you’re employed again. In Colorado, call 2-1-1 or visit 211Colorado.org to connect to critical resources and assistance programs.
If you can, avoid loans against your retirement accounts, and avoid high interest loans.
Lastly, unemployment is something millions of Americans are experiencing right now. You’re not unemployed because you’re not valuable. You’re unemployed because we are experiencing a pandemic and national crisis. If you feel sad, it’s okay. If you need access to mental health crisis support, contact organizations such as Colorado Crisis Services at https://coloradocrisisservices.org. You can call 1-844-493-TALK(8255) or Text “Talk” to 38255.
Financial decisions can feel complex and hard even under normal circumstances. If the current market volatility has you questioning what are the “right” actions you should take now, you are not alone. Here are five concrete ways for you to jumpstart your financial wellness in the wake of the novel coronavirus.
Time for some facts. Markets fluctuate over time, and returns often come with risks. While COVID-19 is certainly adding unprecedented volatility to the stock market, it is critical to take a long-term view when it comes to investing.
Chances are that when you set up your 401k or IRA you picked a diverse asset portfolio, and selected a monthly contribution that you were comfortable with. Trust that you picked the right option, and stay the course. When considering your retirement, the strategy you had in place in February should be your continued strategy for the months ahead. Take a deep breath and trust that the market will bounce back.
When it comes to investing in your retirement, the best thing to do is invest regularly and aim to have a monthly contribution of 10-15% of your total income.
Have more questions about saving for retirement, and finding a plan that’s right for you? Check out our digital financial resources.
March 2020 marked a period of extreme market volatility, to say the least. To stabilize and protect the economy, the Federal Reserve slashed interest rates to record lows. These decade-low interest rates could save you money if you choose to refinance your mortgage, private student loans, or other debts. Keep in mind that federal and private student loans are different, and you could be losing benefits by adjusting your federal loan.
Traditional advice is to refinance when rates are 1-2% below your current rate. Make sure to keep an eye on your closing costs, so you make a decision that takes all costs into consideration.
For any procrastinators that have put off doing their taxes, good news - U.S. taxpayers have a three-month extension on the deadline to file their federal tax return due to the novel coronavirus pandemic. Tax Day has been pushed from April 15th to July 15th, 2020. Most states have matched the July 15th deadline, but check here to determine your state’s filing deadline.
If you are among the many Americans who typically receive a tax refund -- that is, you paid more taxes to your state or federal government (through payroll withholding, for example) than your actual tax liability, the Internal Revenue Service (IRS) is advising that you file your taxes earlier so that you can get your money sooner.
You can only control what you can control. The good news is that your financial decisions and behaviors are 100% under your control.
Use this time at home to reset any riskier financial behaviors. This is a great time to start building healthy financial habits, while the lure of expensive purchases like events, sporting games, travel, fancy restaurants, etc. are off the table. Find your money zen - what spending habits make you happy? What do you spend money on that you have no memory of a month later? Which purchases sit on a shelf collecting dust or cluttering your space?
Take the time to build a budget and stick to it. Set up regular monthly investments. Build your emergency savings fund. Use this time as a bootcamp to become a top-notch steward of your financial present and future. You’ve got this.
To continue upskilling your financial capability, visit our full suite of educational content.
This blog content was created in partnership with EVERFI. Denver Community Credit Unnion is a member of EVERFI's Financial Capability Network, and we are proud to deliver critical financial education to our communities.
How well you can flex your credit history? Is it enough to impress the next time you need an apartment, loan, or to set up utilities? Someday, like most people, you'll need your credit checked. To get approved, you’ll need a good credit history. To get a good credit history, you’ll need a history of on-time loan payments. Do you see where I’m going with this? That’s right, we live in a world where you need loans in order to get… loans.
In the world of lending, there’s always a chance that you won’t pay back your loan. However, a past of paying back loans is a good predictor of a future of paying back loans. The three big credit bureaus each assess this chance with a scoring system, your credit score.
Your credit score doesn't care what circumstances led to a troubled credit history. It doesn't care about your charming personality or how badly you need the money. It only looks at your past history with borrowing and what loans you currently have. With a low score, you might be denied or offered an expensive rate.
If you don’t have a credit score, it probably means you’ve never borrowed or haven't borrowed in a long time. Either way, applying for a loan with no credit is a lot like applying for a job with a blank resume. From the point of view of lenders, there isn’t enough data to determine how risky lending to you would be. It’s safer to treat you as a risky applicant until you can prove otherwise by building a good history.
What if you wanted to prepare for a mortgage or get a better rate on your next auto loan? Below are a couple of great options available to you to help pump up that score. These options are much easier to get because they are risk-free for a financial institution. Think of it as taking your score to the gym, but without the smells and accidental eye contact. Payments still get reported to the credit bureaus like any other loan. You’ll want to get started early to create a history of on-time loan payments and get your score in shape.
Credit Builder Loan: With a credit builder loan, you receive the money after you finish making payments. It’s similar to building savings, except that your deposits get reported as loan payments. Many institutions will even allow your payments to earn dividends.
Secured Credit Card: This works like any other credit card. The key difference is that you "secure" this card with an amount in a savings account. That amount determines your limit and works like a security deposit. Annual fees can vary so be sure to shop around.
Excited to hear that tax season opened right on schedule? Who isn't, right? Are you filing your taxes today, or do you see the April 15th due date as a far and distant time?
If putting it off is your thing, you’re not alone. Last year, 14 million people submitted their taxes on the last day.1 Even more people filed for an extension. Millions took their procrastination to the next level by filing at the last day of their extension.2
I can’t imagine why, but there seems to be a procrastination epidemic when it comes to filing taxes. With the behavior of millions at stake, there is only one possible cure. An easy to digest list of reasons to file early!
Picture this. You wait to file, but still file before the due date. Instead of your return, you receive a notice from the IRS saying that a return has already been filed with your SSN. You’ve been a victim of tax-refund identity theft.
The IRS uses the elegant system of “first come, first serve” when it comes to filing under your SSN. You might unknowingly be in a race to file first. We’ve talked before about how protecting against data breaches needs to be the new normal. The big Equifax breach in 2017 leaked the info of 145.5 million people. For perspective, there are 243.3 million adults in the USA.3
The earlier you file, the sooner you get your return if you are expecting one. That’s extra money in your pocket. Are there studies that show that having money is more beneficial than not? Probably. Let’s assume there are. Getting your money earlier means you can get a head start on interest earning savings. For example, you can have more time to earn on a Certificate of Deposit. You can also establish emergency savings sooner. The math checks out. Having more earlier means having even more later.
Even if you typically receive a return, you might be surprised to find that you owe this year. There have been a lot of recent changes to the tax code, including the withholding tables. Millions of people are discovering that they didn’t withhold enough.4 Whether you expect to owe or not, filing early will give you more time to figure out how you’ll pay. Otherwise, you could be in for a stressful surprise.
File early. File today. If you are expecting a return this year, you'll need our routing number and your account number to direct deposit your return. You can find our routing number and instructions to find your account number below.
Our Routing Number:
Finding your account number in Online Banking:
1. Locate our account in the dashboard.
2. Your full account number is the number listed as MaskMICR. This includes zeros and the digit after your member number. (see #2 in screenshot below)
It’s over. Your tax battle has ended. With an average tax refund for a Coloradan at about $2,500, now it’s time to have a blast! And of course, we have suggestions to help you do that.
Wait a minute. How are these financially responsible options, “Having a blast?” Well, you realize this is a credit union’s blog, right? Seeing our members improve their financial situation is very exciting for us. Sometimes the most straightforward choice is simply the best one.
1. Build Your Safety Net
We’ve talked before about how you need an emergency fund. Here is your chance to get a jump start saving for unexpected costs. Avoiding debt and preparing for future problems is like removing future anti-fun.
2. Removing Debt Shackles
If you owe on loans or credit cards, you can use for refund on decreasing your debt-to-income (DTI). Even if you are looking at not paying it off for a long time, that early boost can save you money in interest down the line. Be aware that early repayment penalties do exist on some loans. Be sure to check with your current lender for any penalties.
3. Life Goals
Tuck that money away for a future life milestone. This could be a down payment on a house, college, children’s daycare (which can rival the cost of college), or retirement. Don’t get overwhelmed by all the things that you’re “supposed” to be saving for. Don’t worry about hitting these milestones when you’re “supposed to.” But your tax return can be the first step towards progress with a goal that is important to you. Whatever your goal might be, we can help you with your savings.*
Ok, but what if you want to actually spend some of that sweet moolah. All work and no play, right? Don't worry. We've got you covered below.
4. Mad Skills
Take a class in something cool. If it’s a skill that could help your career, even better. A passion hobby could be an investment as well. Interested in making an obscure form of Japanese porcelain? That could lead to a nice side hustle. At the very least, do something that will improve your physical or mental health.
5. Find Adventure
Visit a place you’ve never been to, watch a concert, or go see a play. While happiness over new toys will fade over time, fun experiences keep you happy longer. The world is full of events and places waiting for you to find.
6. Buy Something!
This is the one you’ve been waiting for, right? Treat. Yo. Self. Keep in mind that shiny new things don’t stay shiny. If it’s something you’ll end up replacing with next year’s refund, break the cycle now. There are plenty of life improving things that you never thought about.
*Accounts are federally insured by the NCUA for up to $250,000.
Could you afford an unexpected cost of $500 right now? About half of Americans would answer, “no.” What about a more serious emergency such as a job loss? The standard emergency fund is three to six months of your living expenses. Only about 23% of adults have an emergency fund saved up.1
I know it sounds like a lot (it is), but the future is volatile. This covers those unexpected costs that crop up throughout the year. Things like flat tires, travel for funerals, house or car repairs, medical bills, and job loss. Despite the low unemployment rate right now, it takes the average job seeker 16 weeks to find their new job.2 Some people fall into long-term unemployment, or have to miss work due to a medical emergency.
If you're not ready for something like that to happen, you are not alone. One of the following reasons could be why you, along with 77% of American adults, don’t have an emergency fund. Read on to find out which applies to you.
If you are putting every penny into paying off debt, it is even more important to have an emergency fund. Otherwise, every unexpected expense takes you off track. If a severe emergency happens, you'll have no way to make your debt payments at all.
This sort of situation will take some careful budgeting. Set aside some money to save each month. Otherwise, if something happens you'll create even more debt.
Maybe, but investments are a gamble. Even Warren Buffett has lost big on investments. Denver Community Credit Union’s savings options are safe and insured.* What if losses in the market are what caused your emergency. Those who job hunted during the Great Recession will remember what that was like.
It doesn't have to all sit in a savings account. Consider splitting is up based on the type of emergency. You could use a Health Savings Account (HSA) for medical emergencies. Since bigger emergencies don't happen that often, you could grow some of your fund in a CD or Roth IRA. It is possible to still come out ahead even if you need to pay early withdrawal penalties. Some of these option could also lower your tax burden or roll into retirement. **
Wow, how cool is that? But the future version of you would like to have some fun too. Another way of interpreting, "YOLO" is that there is only one chance to do things intelligently. (Do people still say YOLO?) What happens if your “living once” lasts a long time?
Consider calling it a spontaneity fund instead. It would be nice to have something set aside for an unexpected adventure. And while you go to get that tattoo that says "no egrets" and you get a flat tire on the way, you'll be set.
Well, of course not yet. 3–6 months of expenses is a challenge for everyone. But it can be even more expensive not to have an emergency fund. Ironically, unexpected expenses are a certainty. If you don't have the money when you need it, you'll have to borrow or use a credit card which is more expensive in the long run.
People often receive money that they didn't budget for such as a raise, bonus, or tax return. If fact, there was a recent minimum wage increase. Consider automating or transferring the extra money into a savings account. Your other option is to look at which expenses you can live without.
If you have never saved before, it can seem daunting. Start small. Try to build a flat tire fund. Once you achieve that, build a fund for a larger repair. By then, saving will become a habit and you'll learn not to miss that money. Our E-Learning course, "Building Emergency Savings," can help you get started. If you need any help or have questions about any of our savings options, feel free to contact us.
*We are federally insured by the NCUA for up to $250,000.
** Please consult with a tax advisor.
It’s happening. We are switching our cards to the EMV chip. This will help protect you from fraud. Let me explain.
Thieves can easily make a counterfeit version of your card if they get the code within the magnetic stripe. This is often done by installing skimmers to card readers, usually at ATMs and gas station pumps. Some modern skimmers can be inserted deep into the card reader making them un-detectable from the outside.1 They can even use tiny cameras to capture your pin number. Sounds pretty James Bond. So how does the EMV chip help?
You’ve probably seen the chip in use: insert it into the reader, wait a few seconds, and it will let you know it is done by gently singing the song of its people. The magic happens while the card is still inserted. The chip will generate a different code each time it is used which makes any method of skimming that code useless.
The short answer: no.
The less short answer: if someone has your credit card information, they can still make purchases online or by phone. But with the EMV chip, making a counterfeit copy of your credit card won’t be as easy as it once was.
We are still in a transition period—EMV cards still have the magnetic stripe and the new chip reader terminals still accept swipes. Adoption of the technology has been slow in the U.S.2 As swiping continues to get phased out, EMV will become the spicy awesome-sauce of card security.
The Equifax breach is potentially the most damaging data breach of all time. Equifax is one of the three big credit reporting agencies, the other two being Experian and TransUnion. Their job is to maintain your credit history and decide what your credit score is. About half the population of the United States had data stolen which includes social security numbers, dates of birth, and driver license numbers. If your data was stolen, your identity will be vulnerable for years if not decades.
Now, you’re surely thinking, “With all the breaches lately, I’m sure everyone has all my information anyways.” People seem more than willing to be outraged (and entertained) by all the recent missteps being revealed, but view identity protection as an unwinnable fight.
Are we getting too used to data breaches? Is the sky falling yet again? The world is increasingly digital, and large companies building their IT security out of straw seems to be the new normal. We’ve seen a lot of big names in the headlines lately: Target, Chipotle, and Sony to name a few. Not even our Game of Throne scripts are safe (no spoilers, please).
Most of the largest data breaches have happened within the last five years or so. The largest data breach was Yahoo when three billion accounts were hacked in 2013. That’s billion with a “B.” I can only imagine the army of underground elves it took to search through them. Yahoo then had a breach of 500 million accounts in 2014.1 Progress, my friend, not perfection.
Human error and poor decisions will continue to exist at companies that have your data. The resigned CEO of Equifax testified recently that a single person had failed to implement a security patch.2 Identity protection will have to become a modern skill that we all need to learn. Seek advice on what you can do to protect yourself starting with the Federal Trade Commission.
We have a product that can help too. Members of the Denver Community who are signed up with ID Safe Choice can have stolen identities recovered for them by a Professional Recovery Advocate. This service can also be extended to family members. The service costs $1.96 a month*. Other protection services are available on the market, although may cost more on a monthly basis. Choose the right service for you and don’t give up!
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