What Teachers Need to Know About Student Loans and the COVID-19 Stimulus Bill
With the majority of us stuck at home, bombarded by the constant flow of information surrounding the Coronavirus, it’s become more difficult than ever to sort through it all and figure out the effects on your health and your wealth. We're not medical doctors, so we recommend you stick with the Centers for Disease Control's guidance and your doctor’s orders on the health side, but if there’s one place we can help out, it’s understanding the potential impact of this bill on your wealth.
Important Updates and Resource List For Clients During COVID-19
Though we've been in touch with many of you as the world has changed over the past few weeks, I thought that it might be helpful to send out a message to all of our clients summarizing some of my thoughts on key topics as well as providing a consolidated list of valuable resources that I’ve been building which you may be able to benefit from. This list will be fairly long, and I realize that not every section will apply to all of you, but I think that all of you will find at least some parts of it be useful for yourselves or for people close to you.
CARES Act: Recovery Rebates
Over the past few days, we have read through the H.R. 748 (CARES Act) bill and there are some specific items we think you could benefit from, if your short term finances could use the help. Even longer-term there are some items that will affect you.
CARES Act Background:
The biggest goal of the CARES Act is to put money in the pockets of the American people quickly.
CARES Act Timing:
The government anticipates people receiving rebates in the next three weeks. (Mid-April 2020)
CARES Act: Enhanced Loans From Employer Retirement Plans
Previously, if you ever needed to request a loan from your 401(k) or 403(b) plan, you’d be restricted to the lesser of 50,000 or 50% of your vested account balance. Meaning if your vested balance was 90,000, you’d be limited to 45,000 (90k * 50%) as that is less than 50,000. The CARES act effectively doubles both of these prior limits. Now it’s 100,000 or 100%, but keep in mind it’s still the lesser of. As an added bonus, you can also elect to defer payments on your 401(k) loan for one year.
CARES Act: Miscellaneous Healthcare Benefits
As a result of the Patient Protection and Affordable Care Act (PPACA) from 2011, most ‘over the counter’ drugs and medicines technically required a prescription to be considered a qualified expense. Meaning it could be paid from the different Health focused savings accounts like a Flexible Savings Accounts (FSA), Health Savings Account (HSA), or Medical Savings Account (MSA).
But with the CARES act, all over the counter medications including female care products are now considered qualified medical expenses and can be paid for or reimbursed by the various health accounts.
CARES Act For Businesses: Employee Retention Credit
If you do not receive a loan from SBA as a result of the other portions of this law, you may be able to claim a very favorable tax credit. This is a refundable credit that goes against the businesses’ share of Social Security taxes, typically 6.2%.
First hurdle: Compare Quarterly Revenue for 2020 to that same quarter in 2019. If 2020 is less than 50% of 2019, you pass.
Plan Your Finances with the CARES Act
We’re in one of these historic moments:
- Where were you when JFK was assassinated?
- Where were you during 9/11?
- What did you do during coronavirus?
We’re in the beginning stages of novel COVID-19’s disruption. The human toll of this pandemic will devastate many households across the globe, and it’s incredible to see many people go to war to fight this virus. Thank you to all of our medical professionals, including my own wife who works in the Cheyenne Emergency Room. The world will come together to combat this silent enemy in the medical arena.
The CARES Act – A Glimmer of Hope
The news of late has been a cold, bleak landscape. However, the creation and passing of the CARES Act by our US federal government last week provided me with a glimmer of hope, like seeing the first little leaves of Spring bursting from bud. While it is likely going to be a long road before we reach a metaphorical summer, any hope is welcome. The CARES Act, or the Coronovirus Aid, Relief, and Economic Security Act, will have widespread impact. And the impact will be massive. I feel hope for two reasons.
What You Need to Know About the CARES Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on 3/27/20. It is the largest stimulus package in US history and will directly impact nearly every American. While the law is lengthy and still being analyzed, I have summarized the areas we will see benefit most of the public directly which are:
- Direct stimulus checks
- Retirement account relief provisions
- Student loan relief
- Small business loans
What to Know About the Coronavirus Aid, Relief, and Economic Security Act (CARES)
The CARES Act is an economic relief plan for individuals and businesses of unprecedented size, totaling about $2 trillion. As a comparison, the 2019 US GDP was about 21 Trillion. The Act is very broad and includes many different programs aimed at reaching broad sections of the economy. Our goal is simply to inform readers and clients of parts of the Act that may affect their financial plans, not to dig deep.
For more on the CARES Act, be sure to check out Good Financial Reads: What You Need to Know about the CARES Act (Part One).
Following along with the blogs of financial advisors is a great way to access valuable, educational information about finance — and it doesn’t cost you a thing! Our financial planners love to share their knowledge and help everyone regardless of age or assets.