Coronavirus Financial Aid Bill: What's In It for Consumers

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A $2 trillion financial aid package for Americans hurt by the coronavirus pandemic appears to be finally on its way.

The legislation, passed by the Senate late Wednesday, goes to the House on Friday for expected approval. President Donald Trump says he would sign the bill immediately.

Known as the CARES Act (for Coronavirus Aid, Relief, and Economic Security), the 880-page bill contains several key measures (PDF) to provide financial help to families, including direct cash payments of up to $1,200 to many individuals, enhanced unemployment benefits, suspension of student loan payments, and relaxed rules for tapping retirement savings.

“This is a good downpayment on helping individuals stay afloat for the next several weeks,” says Nicole Kaeding, vice president of the National Taxpayers Union Foundation, a nonprofit group in Washington, D.C.

Still, given the severity of the economic downturn—unemployment claims hit a record 3.3 million (PDF) last week—it’s highly likely that that Congress will end up passing additional stimulus measures, Kaeding says.

Here's a look at the provisions that will help consumers.

Direct Payments

The bill gives one-time direct payments (PDF) of up to $1,200 for individuals ($2,400 for couples) and $500 for each child under the age of 17. The maximum a family can receive is $7,500.

Eligibility will depend on income. Single people whose adjusted annual gross income is $75,000 or less will get the full $1,200. Those with adjusted gross incomes above $75,000 will get smaller amounts, with no payment to anyone making $99,000 or above.

For married couples, the $2,400 benefit begins to phase out after $150,000 in combined annual income, with no payments to any couple making $198,000 or more.

The IRS will determine your eligibility based on your 2019 or 2018 tax return. If you haven’t filed in those years, the income will be based on your Social Security statement.

How quickly will you see that money? Treasury Secretary Steve Mnuchin has said the first checks will arrive within three weeks. That timetable assumes that the IRS already has your bank account information, which must be provided for the direct deposit of any refund or payment. Nearly 60 percent of filers received a refund via direct deposit last year, says Kaeding.

For those who have not provided the IRS with bank information, you will probably have to wait for a check. According to a study by the nonprofit Tax Foundation examining past federal payments during downturns, the lag between the program’s enactment and distribution of payments ranged from six weeks to more than two months.

The IRS still has not yet posted details about the direct payment program, but it has set up a page on its website that will soon be updated.

Unemployment Benefits

Under the bill, the federal government will increase your state unemployment benefits by $600 a week for four months. Benefits will also be extended by an additional 13 weeks. Gig workers and freelancers, who previously were not able to claim unemployment, will also be covered (PDF).

Many states have already enhanced their jobless benefits. For example, 19 states (including New York, Washington, and California) have dropped the standard one-week waiting period before collecting benefits, according to research by the nonprofit National Employment Law Project.

To find out about the unemployment benefits in your state, including new policies related to Covid-19, you can go to CareerOneStep.org, which is sponsored by the U.S. Department of Labor.

Be aware that getting through to your local unemployment office can be challenging right now. But many states are adding hours and hiring additional staff. So be persistent.

Student Loans

The White House has previously announced help for many federal student loan borrowers. Under the CARES Act, that aid will be codified into law, says Mark Kantrowitz, publisher of SavingforCollege.com.

Under the new law, borrowers will not have to make any payments for six months (through Sept. 30, 2020) on federal student loans, though that money will have to be paid later. Interest during the six-month period will be waived entirely.

Only certain federal student loans are eligible—those owned by the U.S. Department of Education (DOE), which include direct loans and loans made under the Federal Family Education Loans Program (FFELP) that were transferred to the DOE. Perkins Loans, FFELP loans held by a bank or other financial institution, and private student loans are not eligible.

Involuntary collection of defaulted student loans, including wage garnishment and claiming of tax refunds, will also be suspended. You can find more information and assistance on student loans at the The Institute for Student Loan Advisors, a nonprofit group.

Retirement Plans

The bill loosens the limits on taking money out of your retirement plan in an emergency, similar to previous disaster relief bills.

For those affected by the coronavirus crisis, such as testing positive or financial hardship due to the pandemic, you can take out up to $100,000 in retirement savings, without paying the 10 percent penalty if you're under age 59 1/2.

The provision applies only to savings in a qualified retirement plan, such as a 401(k) or IRA. You will still owe tax on the money you pull out. The increased limit also applies to 401(k) loans.

Still, just because you can tap more of your savings, doesn't mean you should. "You really should view pulling money out of your retirement plan as a last resort," says Ed Slott, a CPA and IRA expert in Rockville Centre, N.Y.

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