What to Know About the HEALS Act
Update: On August 8, 2020, President Trump announced four executive actions impacting taxes, student loans, unemployment, and housing for renters and homeowners. For more details on these actions and what they could mean for your finances, read our summary here.
The coronavirus pandemic has affected the financial health of millions of Americans—as statewide shutdowns triggered a sudden spike in unemployment. The federal Coronavirus Aid, Relief and Economic Security (CARES) Act included a number of relief provisions to help people who are struggling financially due to COVID-19. More specifically, the CARES Act provided qualifying individuals with Economic Impact Payments funded by the US government.
To date, the IRS has sent out approximately 159 million stimulus checks to eligible Americans. But, more help could soon be on the way. US lawmakers have proposed a new round of federal relief and stimulus measures—aimed at helping those who were impacted by job losses or layoffs stemming from the coronavirus pandemic.
HEALS Act: What Is It?
The proposed new stimulus package is called the HEALS Act —short for Health, Economic Assistance, Liability Protection and Schools. The Act was introduced by Senate Majority Leader Mitch McConnell and a handful of Republican Senators in late July, 2020.
The HEALS Act span a number of stimulus proposals that could help drive economic recovery, while also providing immediate economic relief to Americans who are hurting financially because of the pandemic. The bill is designed to be an extension of some of the key provisions from the CARES Act. If passed, it would also introduce novel financial relief measures not found in the original CARES ACT.
What’s Included in the HEALS Act
While the HEALS Act resembles the CARES Act in some ways, it also covers new terrain with regard to reopening and restarting the US economy.
Here’s some of the more important provisions of the proposed new stimulus bill at a glance:
• A second round of stimulus check funding for eligible recipients
• Continued federal supplement payments of unemployment benefits (at a reduced rate)
• Expansion of the Paycheck Protection Program to help struggling small businesses
• Tax credits and other incentives for small business owners to help keep workers on the payroll
• An increase in the business-meal deduction from 50% to 100%
• Liability protection and funding for schools, businesses and other entities that are reopening during the pandemic
Of these measures, the first two listed are, likely, to be the main focus for Americans who’ve taken a direct or indirect financial hit because of COVID-19.
The initial round of stimulus payments (typically $1,200 per adult) authorized in the CARES Act were a one-time occurrence. What’s more, the $600 additional federal weekly unemployment benefit (also provided under the CARES Act) is set to run out at the end of July. Receiving a second stimulus check and/or the extension of federal unemployment benefits could make paying bills easier for Americans whose incomes are still below their pre-coronavirus levels.
Second Round of Proposed Stimulus Checks Mirror the First in Some Ways
Central to the proposed HEALS Act is the call for a second wave of stimulus checks to be delivered into eligible taxpayers’ hands. The new bill handles these payments much the same way the CARES Act did.
First, the stimulus payment amounts would be the same – up to $1,200 for single filers and up to $2,400 for joint files. The additional $500 per dependent in stimulus funds is also included in the Act, with the definition of a dependent being expanded to be more inclusive.
As far as the income limits to qualify, Americans may be eligible for the maximum stimulus payment if their adjusted gross income (AGI) doesn’t exceed these maximums:
• $75,000 for single filers
• $150,000 for joint filers
• $112,500 for heads of household
Some Americans with adjusted gross income beyond these limits can still qualify for a reduced stimulus check under the proposed HEALS Act. But, that check would be trimmed by 5% of AGI over the limit—eligible earners in this group can make up to $99,000 for single filers,$198,000 for couples filing jointly, and $146,600 for heads of household.
Information from the 2019 tax year would be used to calculate what amount, if anything, an individual would be eligible to receive. If, for some reason, a taxpayer has not yet filed their 2019 taxes despite the extended July filing deadline, the IRS can look at your 2018 return instead to determine eligibility.
If an individual received a stimulus check from the first CARES Act relief package and since filed their 2019 taxes, they may want to bear in mind that the second payment amount may differ under the HEALS Act. It’s possible to receive more money or less, depending on how one’s income and deductions add up.
How the New Stimulus Payments Differ
While there are similarities between the payments issued under the CARES Act and those that could be issued under the proposed HEALS bill, there are a few big differences to note.
First, the HEALS Act offers more leeway when it comes to who is considered a dependent for claiming the additional $500 in funding. Previously, recipients were limited to claiming an eligible child under 17 in age to get the credit. But, the newly proposed bill would lift the age restriction. In practice, that means having a dependent child older than 17 (and up to age 24, with other potential qualifiers) would not necessarily render an individual or couple ineligible for the extra $500 in stimulus funds this round.
The HEALS Act also addresses stimulus payments to people who are dead or incarcerated. Following the passage of the CARES Act, the IRS paid out approximately $1.4 billion in payments to people who were deceased. (Though next of kin were asked to return these checks.) The HEALS Act would exclude anyone who died before January 1, 2020 and anyone who’s been incarcerated for all of 2020.
Unemployment Benefits May Continue, But at a Reduced Rate
One of the more helpful features of the CARES Act was the expansion of unemployment benefits. Under the CARES Act, people already eligible to receive state unemployment benefits became eligible to receive a supplemental federal benefit of $600 per week. The CARES Act also made it possible for those who don’t ordinarily qualify for unemployment—such as, self-employed individuals or gig workers—to become eligible for benefits.
But, these added unemployment benefits are expiring on July 31. The HEALS Act would include guidelines for continuing payments, temporarily—with some key changes.
The most important change would be a reduction of the additional federal unemployment benefit from $600 per week to $200 per week. The reduction, along with other measures in the bill to help businesses and schools reopen, are designed with the intention of getting people back to work while still providing some type of extra financial safety net.
For people receiving the expanded benefits under the CARES Act, this measure could be a mixed bag. While an added $200 a week could help provide some financial wiggle room, the reduction in benefits could create new financial pressures for households that haven’t yet recovered to previous income levels.
A $450 temporary return to work bonus was previously proposed earlier in July to help people making the transition away from unemployment. But, it’s unclear whether this bonus would be included in the final version of the HEALS Act, if it’s passed.
No Provision for Student Loan Relief Yet
Another highlight of the CARES Act dealt with the treatment of student loans.
Under the CARES Act, eligible federal student loan borrowers could take advantage of a temporary forbearance period to put their required payments on hold through September. The CARES Act also put the brakes on interest charges for that same temporary period. Any collection actions in progress for defaulted loans were temporarily halted, too. Nothing in the CARES Act addressed private student loans.
The HEALS Act (as it stands now) doesn’t mention student loans. That could be a problem for the millions of federal student loan borrowers who have taken advantage of the break from making payments while they are unemployed or underemployed. Once the relief provisions expire in September, borrowers would be expected to resume their regular payments and interest would begin accruing again. Any collection actions that were halted by the Act would also resume.
Those with outstanding student loans, whether federal or private, may want to reevaluate current plans for managing repayment. If one’s federal loans are in a CARES ACT suspension that’s about to expire, for example, it may be worth examining if it’s a helpful time to consolidate or refinance student loans. (It’s important to note that refinancing federal loans with a private lender will eliminate key federal benefits and protections, such as various income-driven repayment options, loan forgiveness for public service, and would likely exclude them from additional pandemic-related federal student loan forbearance).
Refinancing may also be an option to consider if a borrower only has private student loans. SoFi, for instance, offers student loan refinancing options to help graduates manage loan repayment.
For those unhappy with the interest rates on their current student loans, student loan refinancing could be worth a look–especially for borrowers who have variable rates on their loans. Interest rates across the board are near historic lows so, for those who qualify, switching to a fixed interest rate loan could be a great option to consider.
Considering a Financial Checkup
The next federal stimulus bill is still up in the air, as US lawmakers from both parties attempt to reach a compromise. In the meantime, Americans could consider their personal finances and evaluate how a new stimulus package, like the HEALS Act, might affect their present economic situation. This could mean doing simple things, like cutting out any unnecessary spending, finding new ways to boost savings (if possible), and reviewing outstanding debts.
For those with student loans to pay down after the CARES act forbearance expires in September, SoFi offers Student Loan Refinancing that could save borrowers money each month—or help them pay off the loan faster.
Student Loan Refinancing
If you are a federal student loan borrower you should take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. (You may pay more interest over the life of the loan if you refinance with an extended term.) Please note that once you refinance federal student loans, you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans, such as the SAVE Plan, or extended repayment plans.