The federal government helped millions of Americans through the early months of the pandemic by allowing them to defer payments, with little negative effect, on mortgages and student loans, two markets in which it holds huge sway. But the government’s reach doesn’t extend to credit-card lending, auto loans or personal loans, and borrowers with those forms of debt ended up with much less relief, the Wall Street Journal reported. As a consequence, federal debt relief has been of greater benefit to homeowners and college graduates, many of whom entered the recession in relatively good financial shape. Lower-income workers, who are more likely to rent and to not have a college degree, saw less benefit. Other programs, including expanded unemployment insurance, were more helpful for lower-income workers. The deferral programs, unprecedented in scale, are credited with keeping the economy temporarily afloat. But the divergence in how the programs are playing out reflects that the tools used to restart an economy are usually blunt, and can have unexpected effects. Deferral programs for pausing mortgage or student-loan payments were set out by the CARES Act, the $2 trillion stimulus program passed in March, and shaped by further government involvement. That made them easier to get and more generous and flexible. For example, mortgage servicers were told to let borrowers pause payments for up to a year if their loans were government-backed, and there are rules to protect borrowers from being forced to make up all the missed payments at once. Deferrals on federal student loans are granted automatically, with no interest accruing, through Dec. 31. Deferral programs for credit cards, auto loans and personal loans, meanwhile, were left to lenders and often decided case by case. Many lenders granted customers two to three months of relief before requiring them to start paying again. Some are asking borrowers to pay back their skipped payments in a lump sum.
