Fahe connects directly with families through our Loan Servicing department and Membership Network, which allows us to identify needs and swiftly take action to craft solutions that provide opportunity and change. This connectivity has been crucial as we’ve worked to deliver relief funds to communities affected by COVID-19. However, we are seeing a growing gap in the ability of families to make ends meet.
Two factors—the delayed adoption of a second stimulus package, and the increasing energy bills that many families face in the winter—could combine to push families off the path of financial stability in the coming weeks.
First, the delay by the federal government to provide additional support in the form of a second stimulus, expiration of state-level eviction moratoria, and end of automatic forbearance of student loan payments will all hit as the 2021 begins. Second, the uneven job recovery disproportionately affects families with lower paying jobs, like retail, or workers with less education who work in jobs that did not transition to remote work. Finally, low-income families with house payments or rent that may be affordable in the best of times frequently face high-energy costs that spike in the winter.
These factors motivated Fahe to turn to our own data to see how the effects of the pandemic economy are affecting the families we serve through our Membership Network and our loan-servicing department. Fahe has the largest Network of boots-on-the-ground leaders in one of the U.S.’s most challenged regions, Appalachia.
Fahe services loans for more than 2,000 borrowers, some of which Fahe owns and others which are handled on a contract basis. Remarkably, despite national reports of the economic difficulties facing families, especially those with lower incomes, Fahe’s loan servicing portfolio maintained a low level of delinquencies both in the months immediately following nationwide calls for stay at home orders and schools moving to virtual instruction in March and April, as well as through the third quarter of 2020. In July 2020, the delinquency rate was 4.2%, and in November 2020, it had fallen to 3.0%. This is far better than the national rate for nonbank loan servicing delinquencies (6.2%) in July 2020 (Urban Institute). Notably, many of the borrowers whose loans Fahe serves have extremely affordable monthly payments. Fahe’s loan serving department also prioritizes communication with borrowers in order to help them stay current, or identify appropriate remedies. As recently as October, the Urban Institute discussed the importance of communication with borrowers in order to help them identify options, such as forbearance, which could help them avoid a series of falling financial dominoes that might lead to foreclosure.
In the spring, as the effects of the global pandemic spread, national media reported the immediate and devastating impact on the economy for U.S. households, particularly for those unable to work remotely or who could not adapt to the loss of childcare. This disproportionately affected older workers, those with less education, people in jobs that could not work remotely, such as those without access to broadband internet (Update on the Economic Well-Being of U.S. Households: July 2020 Results).
Households received an invitation in July to participate in Fahe’s survey. In addition to basic demographic questions, the survey also asked if their economic situation had changed, about financial resilience, stimulus funds, and whether they planned to send children to school in the fall. We received 253 usable surveys back, for a response rate of 12%.
The respondents skewed heavily toward women, with 73% of the respondents identifying as female, compared to 20% for male, and 1% preferring not to say and 6% skipping the question. The age ranges peaked in the 55-64 group (28.9%) with 21.3% of respondents in the 45-54 age group, and 35-44 and 65-74 both having approximately 15%, followed by 6.7% among 35-44 year olds, and 5.5% in the 75 or older group, with the 18-24 year old group having just 1.6%. The household composition included 36.4% single, 30% married or living with a domestic partner, 15.8% divorced, and 10.7% widowed, with 5.5% skipping this question. Only 36% of respondents reported children under 18 in the household, but every age group except 75 or older had some respondents with children. These statistics illustrate that throughout the country, grandparents and others are helping to raise young children. The largest group of households with children were the 35-44 age group and the 45-54 age group with about 29% of respondents in these cohorts reporting children at home.
In May, the Federal Reserve released its annual Report on the Economic Well-Being of U.S. Households, reporting 2019 data as well as supplemental information from an April 2020 panel. Several of the questions posed in our borrower survey are similar or identical to the questions asked by the Fed. This gives us a way to benchmark our borrowers’ experiences with a national dataset.
The Economic Well-Being report found that 63% of adults said they would pay an unexpected expense of $400 with cash or a credit card they immediately paid off. (Board of Governors of the Federal Reserve System, “Report on the Economic Well-Being of U.S. Households in 2019, Featuring Supplemental Data from April 2020”, May 2020. Page 2.) Among Fahe respondents, only 36.4% reported they could pay with cash (which included immediately repaying their credit card, selling items, or using savings). Another 36.4% would go into debt, including borrowing from family or friends to meet such an obligation. Finally, 30.8% would not be able to pay the expense.
General economic well-being is another area of interest for the Federal Reserve; they found that 75% of adults were either doing okay or living comfortably financially. Among respondents to Fahe’s survey, only 45.8% were either doing okay or living comfortably, while almost 20% were finding it difficult to get by financially.
Throughout the year, national polling firm, Civiqs, asked, “over the last year, has your family’s financial situation stayed about the same, gotten worse, gotten better, or ‘unsure.’” In July 2020, 26% responded “gotten worse,” an increase from 19% in January 2020 (Family Finances, Last Year). By contrast, the Fahe respondents reported that 38.4% are somewhat worse off or much worse off, compared to 12 months ago.
The Fed survey highlighted the role of education in comparing how households are doing economically. The survey notes that holders of a four-year degree are much more likely to be doing at least okay financially (88%) than those with a high school diploma or less (63%)—a gap of 25% which has widened from 2016 to 2019.
Among Fahe’s respondents, of whom only 12% have a bachelor’s degree or higher, this trend did not hold, as 43% of those with a four-year degree or higher reported that they were at least “doing okay” while 48% with an associate’s degree or less reported a similar level of economic well-being. This difference may be due to the relatively high number of women in our response sample, and the relatively high number of single person households. Women earn less than men overall, and may also be overrepresented in lower paying fields, although we did not ask about the type of employment in this survey (The Wage Gap Has Made Things Worse for Women on the Front Lines of Covid-19).
The ability to work or do school from home was a key issue for workers who either needed to stay home while schools were closed or whose employers were no longer able to operate as usual due to local or state mandates. This requires access to broadband internet. Nationally, around 90% of households have access to broadband internet (Brookings 2020). However, access is not as widely available in persistent poverty regions (those areas with counties where the poverty rate has been 20% or higher for 30 years or more). Survey respondents reported that just 66% had access to broadband internet either through a computer at home (44%) or a smartphone or table (22%). It is important to note, without proper equipment, access to broadband does not mean a household is set up for remote work or school. Even among households with children, less than 60% had access to broadband and a computer at home.
The lack of government action to support people who have lost income continues to be a concern for household wellbeing. About 11% of respondents reported their employers laid them off, with 9.5% reporting another adult in the household also losing work. In addition, just over 20% of respondents said they had fewer hours of work at their job, while 7.1% reported a member of their household had lost work hours. The economic strain also showed up in the reporting of how stimulus benefits were spent. Over 93% of those responding to the survey said they received a stimulus check, and more than 60% of them reported they paid bills. As Matthew Desmond, the author of Evicted, states, “the rent eats first.” Among the 11% who reported other uses for funds besides bills or debt payments, the most frequent response was “buy food.” This tracks with record-breaking demand on foodbanks, particularly among households with children (Washington Post).
Hope for the end of the pandemic is near, as manufacturers obtain approval and deploy vaccines. However in the coming months, community leaders (such as those in the Fahe Network) running home repair and weatherization programs, distributing emergency bill assistance, and allocating food, are sustaining the precarious bridge between the economic difficulties of everyday people and the recovery they need. Without support for bills, food, heating, and other household expenses, even those households connected to supportive loan-servicers like Fahe risk falling behind in holding on to their most important asset, and losing the stability to shelter from the dangers of the pandemic, provide a safe place to learn, and stay connected to community. Fahe’s leaders are standing fast to support these families both through loan serving and in the communities where these families live, but more investment is needed, soon.
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