Payment Flexibility Tools Can’t End With the Pandemic

The U.S. economy is improving faster than expected, with consumers and experts alike hopeful that recovery is near. Yet even if indicators like gross domestic product and the monthly jobs report continue to rally, a major economic consequence of the pandemic is still imminent unless we act: rising consumer debt that many Americans are unable to immediately repay. Ignoring this risk leaves those Americans in crisis with few options and could ultimately hinder the economic recovery for everyone.

In today’s K-shaped recovery, millions continue to struggle financially. U.S. consumer debt is currently slightly above $4.2 trillion, only a slight rise from February 2020, but that masks the reality many Americans are facing. The Pew Research Center finds that about half of lower-income U.S. adults in households that have lost income during the pandemic have taken on debt to stay afloat, while about 3 in 10 adults — and a higher proportion of Black and Hispanic adults—say they worry every day or almost every day about their level of debt.

Fortunately, the Congressional Research Service notes that “consumers have generally not fallen delinquent on their loan obligations” and “delinquency rates for most other types of consumer debt also notably fell.” As the CRS writes: “Some of this decline is due to consumers entering into loan forbearance agreements,” or payment deferrals.

These payment deferrals, ranging from federal student loan forbearance to private companies’ payment assistance tools, have helped millions of Americans make ends meet without falling into crisis. If these tools end as soon as the economy returns to pre-pandemic levels, as many fear will happen, the results would be catastrophic for vulnerable Americans living on a “knife edge.”  Millions of Americans will be unable to pay their loans on time, leaving them to face debt collectors, default or even file for bankruptcy. This crisis could dampen consumer demand, further prolonging full economic recovery.

Consumers, regardless of credit score, are turning to alternative financial strategies to stay afloat. Nonprime Americans, those with credit scores below 700, and their prime peers are both struggling. The December Nonprime Tracker conducted by the Center for the New Middle Class, the internal think tank of my company, Elevate Credit, showed that in the prior 3 months, 53 percent of prime Americans (up from 34 percent pre-pandemic) and 44 percent of nonprime Americans experienced an extraordinary event that disrupted their finances.

Because of financial problems like these, both prime and nonprime Americans are using their stimulus money on essentials, as the February Nonprime Tracker found. Thirty-two percent of prime and 50 percent of nonprime consumers spent at least some of their most recent stimulus checks on groceries, while 23 percent and 38 percent used it for utility bills.

Those tight budgets leave little money left to pay down debts. Taking away payment assistance tools will create further, likely catastrophic, hardships for consumers already struggling. Accordingly, all Americans, prime or nonprime, need long-term support to weather the financial uncertainties and unpredictability the pandemic has brought.

At Elevate, we’ve long been committed to helping our consumers improve their financial health. Well before the pandemic began, we began building payment assistance tools like payment grace periods, deferment options, no late fees, interest-rate reductions and principal and interest rate forgiveness. Accordingly, when COVID-19 hit the United States, we were able to quickly expand our payment assistance offerings. In 2020, these tools allowed 80,000 consumers to modify their payment plans, usually by filling out a simple online form, at no incremental cost.

Looking at how consumers have spent their money and used these tools has given us more insight into what consumers need. And payment flexibility is the clear answer: The tools have proven so valuable that we are committing to keeping them after the pandemic. At one point, we saw these payment assistance tools used by nearly 20 percent of customers, amounting to more than $100 million dollars in loans. Consumer use is now closer to 5 percent, and we expect similar rates going forward — unfortunately, emergencies and income volatility are not limited to recessions. Even after the recession officially ends, many Americans will still be struggling financially.

Offering consumers payment assistance tools will make other lenders better off too and will support consumers by preventing them from being crushed with an avalanche of debt they cannot repay. That’s why lenders should keep these payment assistance and deferral features after the pandemic is over. Many Americans will continue to need them and helping them achieve their best financial health — and avoid debt collectors, defaulting or bankruptcy — will help us all avoid a potential looming fallout of the pandemic and beyond.


Jason Harvison is the CEO of Elevate Credit, a leading tech-enabled provider of innovative and responsible online credit solutions for nonprime consumers.

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