Laid Off Because of COVID-19? Take These Three Steps
The uncertainty and changes from COVID-19 that we discussed on our blog a month ago have become even scarier and more stressful. Millions of Americans are now unemployed or working fewer hours. If this applies to you, here are three steps you can take to hopefully reduce potential negative effects on your finances.
1. File for unemployment insurance
Unemployment benefits partially replace lost wages, so the amount you receive will depend on what you used to earn. Note: individual states use different formulas to calculate benefit payments.
In addition to state unemployment benefits, the recently approved federal CARES Act provides extra support to individuals who are laid off during the COVID-19 crisis. Eligible workers will receive an additional $600 per week between April 5 and July 31, 2020. In addition, benefits will last for 13 more weeks on top of the state’s current time limit. People who haven’t qualified for unemployment before – the self-employed, independent contractors, or “gig” workers – are now eligible.
Minnesotans can apply for benefits online through the Minnesota Unemployment Insurance website or by phone using the Applicant Self-Service System. If you live outside of Minnesota, learn about your state’s unemployment insurance system through the U.S. Department of Labor website.
2. Maintain health care coverage
If you were covered by your employer's plan, you should be able to keep your existing coverage through COBRA. Federal law entitles you to at least 18 months of continued insurance coverage. However, COBRA might not be the best or most affordable approach.
You can also:
- Find out if you get coverage through your partner/spouse's plan.
- Look into a plan on the health care exchange in your state that may come with subsidized premiums. Losing employer-provided coverage is considered a “qualifying life event.” This entitles you to sign up for a new health care plan outside of the open enrollment period that starts at the end of the year.
- See if you qualify for Medicaid if your income is low enough due to your job loss.
3. Take care of existing obligations
Basic Needs – Take care of necessities first, like food, housing, utilities and medical care.
Most electricity and gas providers in Minnesota are giving customers leeway during the COVID-19 crisis. This includes suspending disconnections of service and giving flexibility on utility bill payments. If you are behind on your electric and/or gas bill or are in danger of falling behind because of COVID-19, tell your utility company your finances have been affected by the pandemic, and ask what help is available.
Student Loans – The CARES Act provides debt relief on federally-held loans only. The law automatically suspends student loan repayments, reduces interest rates to zero percent, and stops collections on outstanding debt. This pause was extended several times, but on September 1, 2023, interest on these loans started to accrue again, and payments will restart in October 2023. Borrowers will receive advanced notice on the specific date of their next payment. Read our blog post on the CARES Act for more details.
Loans held by states, schools, banks or other lending institutions might also be eligible for temporary relief. However, there may be fewer options for these loans, especially private student loans, versus loans held by the federal government.
Contact your lender to find out what type of help is available, and decide if any options make sense for you. Certain benefits you receive now might not pay off later – like having to pay all your delayed loan payments in a lump sum down the road.
Taxes – If you are struggling to pay your federal taxes, visit the Internal Revenue Service’s Taxpayer Advocate website for assistance. For state tax help, Minnesotans should visit the Minnesota Department of Revenue’s Taxpayer Advocate site. Residents of other states should contact their Department of Revenue.
Credit Cards – If you are having trouble paying credit cards, contact your creditor(s). Many creditors are allowing cardholders to temporarily skip a payment or two, for example. However, don’t agree to something you can’t afford, and keep in mind that if you do skip any payments, you will need to catch up on those payments later. When calling, be sure to mention your hardship is due to COVID-19.
Reduced credit card payments can free up resources to pay for immediate needs. Since credit cards are unsecured debts, that means they’re not tied to any assets that can be repossessed, such as a vehicle.
Try not to add to your credit card debt. What you charge now will only increase your monthly payments, which are probably already unaffordable if you’ve lost your job or income.
LSS Financial Counseling is here to provide additional support with your finances. Our experienced financial counselors will help you navigate student loans and repayment options, work with you to create a realistic budget, and provide credit card debt options that fit your individual situation and needs. Call 888.577.2227 for a free, confidential phone session, or complete your session online at your convenience.
Co-authors Sarah Jannusch and Mei Lin Kroll are Certified Financial Counselors with LSS Financial Counseling.