Playing Catch-Up

Playing Catch-Up
Getting back on track with overdue rent
by Alacias Enger

Patrick is a recent college graduate and transplant from California to Oregon. He relocated after graduating with his accounting degree in June of 2019, in part, to live closer to his father. Upon relocating, he secured employment as a part-time bookkeeper while looking for a full-time accounting position. His employer doesn’t supply him with health insurance, so he has been using the Oregon Health Plan, along with CAREAssist (Oregon’s AIDS Drug Assistance Program) to ensure access to his medications. Additionally, he took a job bartending a couple of nights a week at a local brewpub. Patrick had just enough income to make ends meet and tuck a little away into a Roth IRA, which he did every month at his father’s urging. He had an apartment; he was paying down his credit card balance and had entered into repayment for his student loans. For Patrick, life was just settling into a rhythm.

Just a few months into 2020, COVID-19 struck like a bolt of lightning, hitting everything in sight. Fortunately, Patrick’s bookkeeping position was spared, but his bartending job was not. The brewpub was temporarily forced to close its doors, leaving Patrick coming up short. Even with the CARES Act automatically placing his student loans into forbearance, there wasn’t enough money for all of his bills. Like many Americans, he began a delicate dance with deadlines, doing his best to juggle them all for as long as possible. He managed to pay one bill just before it came due again the next month. Eventually, he was no longer able to maintain the juggling act that comes with having more obligations than income. Patrick fell behind on his rent.

The brewpub eventually reopened on a somewhat limited basis, allowing Patrick to regain some previously lost income. This has enabled him to get back on track, paying his current bills. Unfortunately, he still owes the two months of rent he was unable to pay during the lockdown.

The CARES Act initially provided renters with protection against eviction, which was later extended by the CDC to the end of 2020. While this means that millions of Americans are temporarily safe in their homes, it doesn’t stop the past-due rent notices from piling up. In fact, the guidelines for paying back missed rent payments vary by state. Oregon’s Governor Kate Brown has signed multiple executive orders with regards to the brewing eviction crisis. One such order states that past due rent balances accrued between April 1, 2020 and September 30, 2020 would be due by no later than March 31, 2021. This has essentially given renters a six-month grace period to get caught up. Given the looming December 31st expiration of the student loan forbearance extension, renters across the country will be simultaneously reentering student loan repayment and repaying past due rent balances, the combination of which is a perfect storm.

Since Patrick is largely back on track, except for the two months of missed rent payments, he should start by contacting the management company. Most landlords will be prepared to make payment arrangements with tenants that are proactive. Next, he should begin trimming his monthly obligations. He should only be paying the bare minimum on his credit card until the storm clears. He should also contact his student loan company immediately to discuss his options. Even under regular circumstances, federal student loans may be deferred under the Economic Hardship Deferment for a total of three years over the life of the loan. If this deferment option has already been exhausted, borrowers might have access to other types of student loan deferments or forbearance. During this time, borrowers are likely to notice periodic capitalization of interest. So, it would be wise not to take more months of deferment or forbearance than necessary. In Patrick’s situation, this savings could help him tremendously in his effort to repay the rent before his deadline.

Remember that Roth IRA Patrick’s father recommended he open? He had been contributing $50 every two weeks until the shutdown. Since Patrick had already been taxed on the money he had contributed, he can take those funds out at any time. Provided he doesn’t touch the growth, he will not be taxed or assessed any penalties. This should be an absolute last resort for Patrick, but if he absolutely needs it, his Roth IRA could provide him with some emergency funds.

In these circumstances, communication is key. Whether it be with your student loan company or your landlord. Being proactive could propel you across the finish line.

Alacias Enger is a performing artist, writer, and educator. She lives with her partner in New York City, and is the founder of blogs “Sense with Cents” and “Travel Cents.” Follow her on Twitter @sense_w_cents.