COVID-19: Household Debt During the
December 3, 2020
Pandemic
Cheryl R. Cooper,
The Coronavirus Disease 2019 (COVID-19) pandemic has had a large and persistent economic
Coordinator
impact across the United States. Fear of infection, social distancing, and stay-at-home orders
Analyst in Financial
prompted business closures and a severe decline in demand for travel, accommodations,
Economics
restaurants, and entertainment, among other industries. This led to a significant reduction in

employment and a loss of income in many U.S. households. Unemployment rose rapidly to a
Maura Mullins
peak at 14.7% in April and has since fallen to 6.9% in October. Consequently, many Americans
Research Librarian
have lost income and faced financial hardship. Survey results suggest that since March 2020,

about half of all U.S. adults live in a household that has lost some employment income.
Lida R. Weinstock
During the second and third quarters of 2020, different types of consumer debt—consisting of
Analyst in Macroeconomic
mortgages, credit cards, auto loans, and student loans—have exhibited different patterns during
Policy
the COVID-19 pandemic. Notably, credit card balances declined sharply in the second quarter by

about $76 billion, the largest quarterly decline on record. Mortgage debt increased, and other

household debt remained relatively flat.
In addition, during the second and third quarters of 2020, the percentage of delinquent loans declined in most consumer debt
markets. This pattern differs greatly from that of past recessions, such as the 2007-2009 Great Recession. Some of this
decline is due to consumers entering into loan forbearance agreements when they are having trouble repaying their loans.
Loan forbearance agreements allow borrowers to reduce or suspend payments for a short period of time, providing extended
time for consumers to become current on their payments. These agreements do not forgive unpaid loan payments. Instead,
borrowers must repay the amounts owed, and they typically enter into agreements that allow for repayment over an extended
period of time.
Policy responses to the economic impacts of the COVID-19 pandemic have likely prevented many consumers from falling
delinquent on their loan payments. Part of the congressional response was the Coronavirus Aid, Relief, and Economic
Security (CARES) Act (P.L. 116-136), signed into law on March 27, 2020. The CARES Act established consumer rights to
be granted forbearance for many types of mortgages (Section 4022) and for most federal student loans (Section 3513). The
CARES Act’s consumer protections, as well as other financial institution loan forbearance programs, likely helped avoid
sharp increases in loan delinquencies. The CARES Act also provided fiscal relief, including direct income support, which
was likely another important factor making it easier for consumers to pay their existing loan obligations. These actions
included enhanced unemployment insurance and relief checks phased out for higher-income taxpayers.
Given the uncertain trajectory of future COVID-19 outbreaks and their economic impacts, whether these consumer debt
usage and delinquency patterns will continue is unclear. Future public policy may be able to influence the course of the
economic recovery, which could include extending loan forbearance programs, additional fiscal relief, or other policy
options. Congress is currently debating whether COVID-19 pandemic relief provisions should be extended or whether the
cost of these proposals outweigh their benefits. Active legislation that would modify, extend, or create new economic relief
programs includes the Heroes Act (first version: H.R. 6800; second version: H.R. 925) in the House, and the American
Workers, Families, and Employers Assistance Act (S. 4318) in the Senate.
In addition, consumers’ future access to credit markets may become another ris k factor. The congressional response to the
COVID-19 pandemic has primarily focused on helping consumers make existing debt payments rather than focusing on
access to new credit during the pandemic. If consumers find it difficult to access credit markets, the resulting reduction in
consumer spending could harm the economic recovery.

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COVID-19: Household Debt During the Pandemic

Introduction
The Coronavirus Disease 2019 (COVID-19) pandemic1 has had a large and persistent economic
impact across the United States.2 Fear of infection, social distancing, and stay-at-home orders
prompted business closures and a severe decline in demand for travel, accommodations,
restaurants, and entertainment, among other industries. This led to a significant reduction in
employment and a loss of income in many U.S. households. However, consumers have general y
not fal en delinquent on their loan obligations, such as mortgages, credit cards, auto loans, and
student loans. This pattern is unlike that of other economic recessions, such as the Great
Recession caused by the 2007-2009 financial crisis.
Many consumers having trouble paying their bil s have received loan forbearance.3 Loan
forbearance plans are agreements between borrowers and lenders that al ow borrowers to reduce
or suspend payments for a short period of time, providing extended time for borrowers to become
current on their payments and repay the amounts owed to the lenders. These plans do not forgive
unpaid loan payments and tend to be appropriate for borrowers experiencing temporary hardship.4
In addition, many consumers who lost income received direct support from the government,
which may have helped them pay their bil s.
Policy responses to the economic impacts of the COVID-19 pandemic have likely prevented
many consumers from fal ing delinquent on their loans. Specifical y, the Coronavirus Aid, Relief,
and Economic Security (CARES) Act (P.L. 116-136), which was signed into law on March 27,
2020, granted forbearance for many types of mortgages (Section 4022) and for most federal
student loans (Section 3513).5 In addition to this legislative response, financial regulatory
agencies have responded to the COVID-19 pandemic using existing statutory authorities to
encourage loan forbearance and other financial relief options for affected consumers.6 Since the
COVID-19 pandemic began, many banks and credit unions have announced measures to offer
various forms of assistance to affected consumers.

1 For background on the Coronavirus Disease 2019 (COVID-19), see CRS In Focus IF11421, COVID-19: Global
Im plications and Responses, by Sara M. T harakan et al.
2 For background on the potential economic effects of the COVID-19 pandemic in the United States, see CRS Insight
IN11388, COVID-19: U.S. Econom ic Effects, by Rena S. Miller and Marc Labonte.
3 For more information on consumer loan forbearance during the COVID-19 pandemic, including CARES Act rights to
forbearance, regulatory guidance, and impacts on consumers and financial institutions, see CRS Report R46356,
COVID-19: Consum er Loan Forbearance and Other Relief Options, coordinated by Cheryl R. Cooper; and CRS
Insight IN11359, COVID-19: Financial Relief and Assistance Resources for Consum ers, by Maura Mullins and
Jennifer T eefy.
4 Loan forbearance agreements between consumers and financial institutions usually include a repayment plan, which is
an agreement allowing a defaulted borrower to repay t he amount in arrears and become current on the loan according to
an agreed-upon schedule. Repayment plans take many shapes. For example, these plans may include a requirement that
all suspended payments are to be due at the end of the loan forbearance period; the past due amount is to be added to
the regular payment amount over the year after loan forbearance ends; or payments are to be added to the end of the
loan’s term. Interest or fees may or may not accrue during the loan forbearance period.
5 For a summary of CARES Act provisions aimed broadly at stabilizing the economy and helping affected households
and businesses, see CRS Report R46301, Title IV Provisions of the CARES Act (P.L. 116 -136), coordinated by Andrew
P. Scott .
6 Many financial regulatory agencies have updated their guidance to help financial firms support consumer needs
during this time. Regulatory guidance does not force financial institutions to take any particular action for consumers
(such as offering loan forbearance), but it can encourage them to offer various forms of support.
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The CARES Act also provided fiscal relief, which was likely another important factor making it
easier for consumers to pay their existing loan obligations. These actions included direct income
support in the form of enhanced unemployment insurance and relief checks phased out for higher-
income taxpayers (cal ed Economic Impact Payments), among other things.7 These income
transfer programs may have helped some consumers stay current on their consumer credit
payments, particularly those who have lost income during the COVID-19 pandemic.
This report explores household debt since the COVID-19 pandemic began. First, it describes the
effects the pandemic has had on unemployment and income losses, fol owed by a discussion of
observed trends in household debt and delinquencies. Then, the report highlights two important
policy impacts that influenced these trends: consumer loan forbearance and macroeconomic
policy to support households during the economic recession. Lastly, the report discusses the
uncertain outlook for household finances and consumer debt markets.
Household Income During the COVID-19 Pandemic
The spread of COVID-19 and the ensuing public health crisis resulted in a dramatic increase in
unemployment, which peaked at 14.7% in April and has since fal en to 6.9% in October.8 These
rates are the highest since the Great Depression and are worse than the peak unemployment rate
during the 2007-2009 Great Recession over a decade ago.9 Consequently, many Americans have
lost income and faced financial hardship due to the impact of the pandemic.10
Survey results suggest that since March 2020, about half of al adults live in a household that has
lost some employment income.11 Figure 1 shows selected results from the Federal Reserve Bank
of Philadelphia’s COVID-19 Survey of Consumers, an online survey conducted to gather
information from respondents about income, employment, and financial security during the
COVID-19 pandemic. So far, the survey has been administered in five waves during April, May,
June, July, and September 2020. In the first wave of the survey, conducted in April, 39. 1% of
respondents indicated a reduction in personal income, or no income, as a result of the pandemic.12
Waves 2, 3, 4, and 5 saw some improvements to personal income loss as the percentage of

7 For more information on the direct payments to individuals in the CARES Act, see CRS Insight IN11282, COVID-19
and Direct Paym ents to Individuals: Sum m ary of the 2020 Recovery Rebates/Econom ic Impact Payments in the CARES
Act (P.L. 116-136), by Margot L. Crandall-Hollick.
8 Bureau of Labor Statistics, The Employment Situation—October 2020, November 6, 2020, at https://www.bls.gov/
news.release/pdf/empsit.pdf. For more background on how unemployment is calculated and other related economic
concepts, see CRS In Focus IF10443, Introduction to U.S. Econom y: Unem ployment, by Lida R. Weinstock.
9 T he official unemployment rates are possibly underestimates as well—the Bureau of Labor Statistics reported a likely
error in how respondents classified being furloughed. For more, see CRS Insight IN11456, COVID-19: Measuring
Unem ploym ent, by Lida R. Weinstock.
10 For more information on financial industry policy issues during the COVID-19 pandemic for consumers having
trouble paying their bills, see CRS Insight IN11244, COVID-19: The Financial Industry and Consum ers Struggling to
Pay Bills, by Cheryl R. Cooper.
11 For more information on income losses during the COVID-19 pandemic, see CRS Insight IN11457, COVID-19
Pandemic’s Impact on Household Employment and Income, by Gene Falk.
12 Federal Reserve Bank of Philadelphia, Consumer Finance Institute Special Report, CFI COVID-19 Survey of
Consum ers—Wave 5 Supplies More Details on Disruptions and New Data on Savings, at
https://www.philadelphiafed.org/consumer-finance/consumer-credit/cfi-covid-19-survey-of-consumers-wave-5-
updates, see T able 4—Impact to personal Income (hereinafter Federal Reserve Bank of Philadelphia, “ COVID-19
Survey of Consumers—Wave 5” 2020, see T able 4).
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COVID-19: Household Debt During the Pandemic

respondents reporting a reduction in personal income, or no income, decreased to 35.8%, 32.7%,
and 32.1%, and 31.7%, respectively.13
This loss of income may be a large unexpected financial event for many families, and research
suggests that many families may not have much emergency savings. For example, a 2019 Federal
Reserve survey, before the COVID-19 pandemic, found that 37% of families reported not being
able to cover a $400 emergency expense with savings or the equivalent.14 Therefore, this
employment income loss has led some Americans to feel more insecure about their financial
situation. When asked how the COVID-19 crisis affected their concern about their ability to make
ends meet over the next 12 months, 27.7% of respondents in April indicated feeling significantly
less secure than they did prior to the crisis; see Figure 1.15 Responses to this question about
financial security showed improvement in subsequent waves. The percentage of respondents
reporting significant concern about their ability to make ends meet over the next 12 months
decreased from 20.4% in May down to 14.6% in June. However, this percentage increased to
15.6% in July, indicating a slight reversal in the downward trend and an increased concern among
respondents about their ability to make ends meet in the next 12 months. This percentage
decreased slightly to 14.4% in September.16
Figure 1. Percentage of Households Reporting Lost Income and Significantly Less
Financial Security Since COVID-19 Crisis
April, May, June, July, and September 2020

Source: Federal Reserve Bank of Philadelphia, Consumer Finance Institute’s Special Report, COVID-19 Survey
of Consumers—Wave 5, at https://www.philadelphiafed.org/consumer-finance/consumer-credit/cfi-covid-19-
survey-of-consumers-wave-5-updates.

13 Federal Reserve Bank of Philadelphia, “ COVID-19 Survey of Consumers—Wave 5” 2020, see T able 4.
14 Board of Governors of the Federal Reserve, Report on the Economic Well-Being of U.S. Households in 2019,
Featuring Supplem ental Data from April 2020 , May 2020, pp. 2-3, at https://www.federalreserve.gov/publications/
files/2019-report -economic-well-being-us-households-202005.pdf.
15 Federal Reserve Bank of Philadelphia, Consumer Finance Institute Special Report, CFI COVID-19 Survey of
Consum ers—Wave 5 Supplies More Details on Disruptions and New Data on Savings, at
https://www.philadelphiafed.org/consumer-finance/consumer-credit/cfi-covid-19-survey-of-consumers-wave-5-
updates, see T able 6—Financial Security and Outlook (hereinafter Federal Reserve Bank of Philadelphia, “ COVID-19
Survey of Consumers—Wave 5” 2020, see T able 6).
16 Federal Reserve Bank of Philadelphia, “ COVID-19 Survey of Consumers—Wave 5” 2020, see T able 6.
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Notes: Data from Waves 1, 2, 3, and 4 of the Consumer Finance Institute’s Special Report, COVID-19 Survey
of Consumers, are available at https://www.philadelphiafed.org/consumer-finance/consumer-credit/cfi-covid-19-
survey-of-consumers, https://www.philadelphiafed.org/consumer-finance/consumer-credit/cfi-covid-19-survey-of-
consumers-wave2-updates, https://www.philadelphiafed.org/consumer-finance/consumer-credit/cfi-covid-19-
survey-of-consumers-wave-3-updates, and https://www.philadelphiafed.org/consumer-finance/consumer-credit/
cfi-covid-19-survey-of-consumers-wave-4-updates, respectively.
The income loss from the COVID-19 pandemic may impact the ability of some families to pay
their loan obligations or other bil s. Late loan payments can harm an individual’s credit score,
which could reduce their access to credit in the future. Severe delinquency can also eventual y
lead to more serious consequences, such as debt collection, foreclosure, car repossession, or wage
garnishment. For this reason, many policymakers are interested in understanding the impact of
COVID-19 pandemic income losses on household debt and delinquency.
Household Debt and Delinquency Trends
As of the third quarter of 2020, household debt totaled $14.4 tril ion.17 By far, the largest type of
household debt was mortgage debt at $9.9 tril ion.18 The second largest type of debt was student
loan debt totaling $1.6 tril ion, followed by auto loan debt at $1.4 tril ion, and credit card debt at
$807 bil ion.19 Figure 2 shows total household debt and its composition since 2006 using data
from the Federal Reserve Bank of New York. It highlights household debt levels during the two
most recent recessions, the Great Recession that began in late 2007 as a result of the 2007-2009
financial crisis and the current recession that began in early 2020 with the COVID-19 pandemic.
After peaking in 2008, total household debt gradual y decreased over a period of nearly five years
until the middle of 2013, at which time household debt began increasing again.

17 Federal Reserve Bank of New York, Household Debt and Credit (Based on New York Fed Consumer Credit Panel) ,
Center for Microeconomic Data, Q3 2020, at https://www.newyorkfed.org/microeconomics/hhdc/background.html
(hereinafter Federal Reserve Bank of New York, Household Debt and Credit, Q3 2020). For an overview of consumer
financial markets, see CRS Report R45813, An Overview of Consum er Finance and Policy Issues, by Cheryl R.
Cooper.
18 Federal Reserve Bank of New York, Household Debt and Credit, Q3 2020.
19 Federal Reserve Bank of New York, Household Debt and Credit, Q3 2020.
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COVID-19: Household Debt During the Pandemic

Figure 2. Total Household Debt and Its Composition
1st Quarter 2006 – 3rd Quarter 2020

Source: New York Fed Consumer Credit Panel/Equifax, at https://www.newyorkfed.org/microeconomics/hhdc/
background.html.
Notes: The data are inflation-adjusted to 2020Q3 dol ars. HE revolving debt refers to home equity lending.
Economic recessions are shaded in the graph.
Although the current level of debt is close to its 2008 peak, the composition of household debt
has changed in the past decade. In 2008, mortgage debt (including home equity debt) was a much
larger proportion of household debt than it is now. Since the last recession, student loan debt has
doubled and auto loan debt has also grown.
During the second and third quarters of 2020, the pandemic had affected different types of
aggregate household debt balances differently. Notably, credit card balances declined sharply
during the second quarter by about $76 bil ion, the largest quarterly decline on record.20 By
contrast, there were increases in mortgage debt balances, but other household debt balances
remained relatively flat in the second and third quarters of 2020.21 These effects surprised some
observers who thought that credit card debt would increase during the quarter due to lost income
from the COVID-19 pandemic.22 The Consumer Financial Protection Bureau (CFPB) finds credit
card balance declines “across al groups, including consumers residing in both high- and low-
income census tracts,” possibly due to a decline in consumer spending.23 Despite many

20 Federal Reserve Bank of New York, Household Debt and Credit, Q3 2020.
21 Andrew F. Haughwout et al., A Monthly Peek into Americans’ Credit During the COVID-19 Pandemic, Federal
Reserve Bank of New York, Liberty Street Economics, August 6, 2020, at
https://libertystreeteconomics.newyorkfed.org/2020/08/a-monthly-peek-into-americans-credit-during-the-covid-19-
pandemic.html.
22 Jeanna Smialek, “Credit Card Debt Plunges, Driving a Decline in Overall Household Debt,” New York Times,
August 6, 2020.
23 Ryan Sandler and Judith Ricks, The Early Effects of the COVID-19 Pandemic on Consumer Credit, Consumer
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Americans losing income, consumers have general y not fal en delinquent on their loan
obligations. This pattern is unlike during other economic recessions, such as the 2007-2009 Great
Recession. In the second and third quarters of 2020, the percentage of delinquent loans declined
in most consumer debt markets. Figure 3 shows the percentage of delinquent loans that are 30 or
more days late, by loan type, on a quarterly basis between the first quarter of 2006 and the most
recent quarter of 2020. Whereas delinquency increased during the Great Recession, a similar
pattern is not observed during the COVID-19 pandemic. Student loans experienced the largest
decrease in delinquency during the second quarter of 2020, and delinquency rates for most other
types of consumer debt also notably fel . Some of this decline is due to consumers entering into
loan forbearance agreements (discussed in the next section).
Figure 3. Percentage of Delinquent Loans (30+ Days Late) by Loan Type:
1st Quarter 2006 – 3rd Quarter 2020

Source: New York Fed Consumer Credit Panel/Equifax, at https://www.newyorkfed.org/microeconomics/hhdc/
background.html.
Notes: HE revolving debt refers to home equity lending. Economic recessions are shaded in the graph.
Consumer Loan Forbearance Trends
Many consumers who would likely have experienced difficulty repaying their loans received loan
forbearance.24 Loan forbearance plans can prevent a consumer from becoming delinquent, giving
the consumer time to repay the debts owed rather than potential y experiencing adverse
consequences, such as credit score declines, debt collection, or foreclosure. As previously

Financial Protection Bureau (CFPB), CFPB Office of Research Special Issue Brief, August 2020, p. 3, at
https://www.consumerfinance.gov/data-research/research-reports/special-issue-brief-early-effects-covid-19-pandemic-
on-consumer-credit/ (hereinafter Ryan Sandler and Judith Ricks, Household Debt and Credit, August 2020).
24 For more information on consumer loan forbearance during the COVID-19 pandemic, including CARES Act rights
to forbearance, regulatory guidance, and impacts on consumers and financial institutions, see CRS Report R46356,
COVID-19: Consum er Loan Forbearance and Other Relief Options, coordinated by Cheryl R. Cooper; and CRS
Insight IN11359, COVID-19: Financial Relief and Assistance Resources for Consum ers, by Maura Mullins and
Jennifer T eefy.
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mentioned, the CARES Act established consumer rights to be granted forbearance for federal y
backed mortgages and for most federal student loans during the COVID-19 pandemic. In
addition, many financial institutions voluntarily offered loan forbearance and other financial relief
options for affected consumers having trouble paying other types of loan obligations, such as auto
loans, credit cards, private student loans, and bank-owned mortgages. The CARES Act’s
consumer protections and financial institutions’ loan forbearance programs arguably helped avoid
sharp increases in loan delinquencies by making it possible for many loans to receive forbearance
during the spring and summer of 2020. Loans in forbearance are not classified as delinquent,
although they may be driven by similar underlying circumstances for the borrower.
According to the Federal Reserve Bank of Philadelphia’s COVID-19 Survey of Consumers in
April 2020, 18.0% of respondents reported requesting a deferral or reduced payments on
mortgages, rents, or utilities, 18.1% of respondents reported requesting a deferral on a non-
mortgage debt, and 14.0% reported seeking a new loan due to the impacts of the COVID-19
crisis.25 Not al of these consumers reported receiving the financial assistance they requested;
about a quarter of respondents reported not receiving a requested deferral.26 The percentage of
respondents reporting seeking financial assistance rose slightly between April and September
2020 in most categories, including those who have requested payment deferrals.27
Many mortgage borrowers entered loan forbearance at the beginning of the COVID-19 pandemic.
According to Mortgage Bankers Association’s (MBA’s) Forbearance and Cal Volume Survey,
the percentage of single-family mortgage loans estimated to be in forbearance as of the beginning
of November was 5.47%.28 Before the pandemic, the proportion of mortgage loans in forbearance
was relatively smal . According to the MBA, the total share of loans in forbearance increased
from 0.25% to 2.66% between March 2 and April 1, 2020.29 At the beginning of April, following
the passage of the CARES Act, MBA initiated a weekly survey of forbearance and cal reporting.
Figure 4 shows the share of mortgage loans in forbearance each week starting in early April
through the beginning of November. The reported percentage of mortgages in forbearance
increased in April and May, reaching a high of 8.55% as of June 7, 2020.30 Since mid-June, the
share of mortgage loans in forbearance has general y decreased each week, although it remains
much higher than before the pandemic.

25 Federal Reserve Bank of Philadelphia, “ COVID-19 Survey of Consumers,” Consumer Finance Institute’s Special
Report, May 2020, pp. 8, 20, at https://www.philadelphiafed.org/consumer-finance/consumer-credit/cfi-covid-19-
survey-of-consumers (hereinafter Federal Reserve Bank of Philadelphia, “ COVID-19 Survey of Consumers,” 2020).
26 Federal Reserve Bank of Philadelphia, “ COVID-19 Survey of Consumers,” 2020, p. 20.
27 Federal Reserve Bank of Philadelphia, Consumer Finance Institute Special Report, CFI COVID-19 Survey of
Consum ers—Wave 5 Supplies More Details on Disruptions and New Data on Savings, at
https://www.philadelphiafed.org/consumer-finance/consumer-credit/cfi-covid-19-survey-of-consumers-wave-5-
updates, see T able 8—Financial Assistance Sought.
28 Mortgage Bankers Association (MBA), “Share of Mortgage Loans in Forbearance Declines to 5.47%,” press release,
November 16, 2020, at https://www.mba.org/2020-press-releases/november/share-of-mortgage-loans-in-forbearance-
decreases-to-547-percent.
29 MBA, “MBA Survey Shows Spike in Loans in Forbearance, Servicer Call Volume,” press release, April 7, 2020, at
https://www.mba.org/2020-press-releases/april/mba-survey-shows-spike-in-loans-in-forbearance-servicer-call-volume.
30 MBA, “Share of Mortgage Loans in Forbearance Increases to 8.55%,” press release, June 15, 2020, at
https://www.mba.org/2020-press-releases/june/share-of-mortgage-loans-in-forbearance-increases-to-855.
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COVID-19: Household Debt During the Pandemic

Figure 4. Weekly Share of Mortgage Loans in Forbearance
April-November 2020

Source: Mortgage Bankers Association’s (MBA) Weekly Forbearance and Cal Volume Survey. See also MBA’s
press releases for survey highlights, at https://www.mba.org/search/press-release-sea rch?keywords=forbea rance&
start=0&rows=10.
Notes: MBA’s weekly survey covers more than three quarters of first-lien mortgages.
Forbearance increased not only for mortgage loans but for other consumer credit products as wel.
The Trump Administration has set the federal student loan interest rate to zero, and borrowers wil
not be required to make payments due on their loans through the end of 2020, effectively putting
al of these loans automatical y in forbearance.31 Loan forbearance also rose in auto loan and
credit card markets, where consumers do not have a right in the CARES Act to forbearance.
However, many lenders may stil offer it as an option to consumers. According to the CFPB, auto
loans in forbearance increased from about 1.5% in February 2020 to about 3% in June 2020, and
credit card loans in forbearance increased from about 1.5% in February 2020 to about 3.5% in
June 2020.32 In addition, payment assistance was “more likely to be reported for borrowers

31 Section 3513 of the CARES Act suspends all payments due and interest accrual for all loans made under the Direct
Loan program and the Federal Family Education Loan program held by the Department of Education through
September 30, 2020. On August 8, 2020, President T rump directed the Department of Education to extend the “ waiver
of all interest” on federally held student loans through December 31, 2020. For more information about federal student
loan debt relief in the context of COVID-19, see CRS Report R46314, Federal Student Loan Debt Relief in the Context
of COVID-19, by Alexandra Hegji.
32 T he CFPB calculates payment assistance “as an account being reported with a zero scheduled paym ent due despite a
positive balance.” T he CFPB notes that “the variation in the incidence of consumer assistance reported ... may have as
much to do with how furnishers in each market report to the [credit bureaus] as it does with the incidence of actual
assistance.” Ryan Sandler and Judith Ricks, Household Debt and Credit, August 2020, pp. 13-15. Other sources
calculate estimates differently than the CFPB, and report different percentages. For example, T ransunion creates a
broader metric called “accounts in hardship,” which includes loans “affected by natural/declared disaster, accounts
reported as in forbearance, accounts reported as deferred or payment due amount removal, or freezing of account status
and/or past due amount.” T ransunion reports 7.2% of aut o accounts and 3.6% of credit card loans in hardship in June
2020. See T ransunion, Monthly Industry Snapshot: Financial Services, at https://www.transunion.com/monthly-
industry-snapshot-fs.
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COVID-19: Household Debt During the Pandemic

residing in areas with more COVID-19 cases, with majority-Black or majority-Hispanic
populations, and with larger changes in unemployment since the start of the pandemic.”33
Household Debt Trends: Current Recession Compared with the Great Recession
The current recession created by the COVID-19 pandemic differs from the Great Recession caused by the 2007-
2009 financial crisis. Although the pandemic has caused lost income and financial insecurity, mortgage borrowers’
household finances were general y stronger in light of stricter lending standards over the last several years.34 For
example, families have less mortgage debt and more equity in their homes. During the Great Recession, many
families lost equity in their homes resulting from low- or zero-down payment requirements and fal ing home
values. According to the Case-Shil er U.S. National Home Price Index, home prices across the United States fel
more than 25% on average between the peak and the bottom of the housing bubble.35 This led to many
foreclosures, which destabilized local house prices and harmed local communities. In contrast, house prices have
not fal en during the COVID-19 pandemic.36
Loan forbearance may be a more viable solution for families having trouble paying their mortgages during the
COVID-19 pandemic than during the Great Recession, because families have equity in their homes. According to
Black Knight estimates, only 9% of borrowers in forbearance have less than 10% of equity in their homes, and
almost 80% have at least 20% equity in their homes, suggesting that relatively few mortgage borrowers may be at
risk for foreclosure at the moment.37 Borrowers with equity in their homes can avoid foreclosure through loan
forbearances, mortgage refinancing, or if no longer affordable, sel ing the home; borrowers with negative equity
may not have these options.38 During the Great Recession, by contrast, fal ing home prices meant that many
families had negative equity, and therefore were more at risk of foreclosure.39
Student and auto loan debt, however, are higher now for most households than during the Great Recession. The
federal government owns most student loan debt in the United States, and these loans have been effectively in
loan forbearance during the pandemic, thus consumers have been able to choose not to pay on them. Car loans
may also be vulnerable to becoming delinquent in the future. In recent years as auto lending has grown, some
loans were made to subprime consumers who may be more likely to have trouble paying these loans back due to
the economic downturn.40 However, increased demand for used vehicles during the COVID-19 pandemic may
limit potential credit losses in this market, by al owing some consumers the option to sel their cars rather than
becoming delinquent on their auto loans.41

33 Ryan Sandler and Judith Ricks, Household Debt and Credit, August 2020, p. 3.
34 See CRS InFocus CRS In Focus IF11413, The Qualified Mortgage (QM) Rule and the QM Patch, by Darryl E.
Getter.
35 S&P Dow Jones Indices LLC, S&P/Case-Shiller U.S. National Home Price Index [CSUSHPINSA] , retrieved from
FRED, Federal Reserve Bank of St. Louis, at https://fred.stlouisfed.org/series/CSUSHPINSA.
36 S&P Dow Jones Indices LLC, S&P/Case-Shiller U.S. National Home Price Index [CSUSHPINSA] , retrieved from
FRED, Federal Reserve Bank of St. Louis, at https://fred.stlouisfed.org/series/CSUSHPINSA.
37 Black Knight, Black Knight’s August 2020 Mortgage Monitor: At Current Rate of Improvement, Delinquencies Will
Remain Above Pre-Pandemic Levels Until 2022; Loss Mitigation and High Levels of Equity Help Mitigate Foreclosure
Risk, October 5, 2020, p.16, at https://www.blackknightinc.com/black-knights-august-2020-mortgage-monitor/.
38 Regulatory changes following the 2007-2009 financial crisis pertaining to mortgage servicing may also be making it
easier to accommodate many consumers having trouble paying their mortgages. For more information on mortgage
servicing, see CRS Insight IN11377, Mortgage Servicing Rights and Selected Market Developm ents, by Darryl E.
Getter.
39 For more information on the policy issues related to foreclosure and mortgage loan modifications, see CRS Report
R40210, Preserving Hom eownership: Foreclosure Prevention Initiatives, by Katie Jones.
40 Jean Eaglesham and Ken Brown, “Auto-Lending Binge T hreatens to Unwind When Stimulus Measures Ease,” Wall
Street Journal, August 7, 2020, at https://www.wsj.com/articles/auto-lending-binge-threatens-to-unwind-when-
stimulus-measures-ease-11596798003.
41 Nathan Bomey, “Used Car Prices Spiking as COVID-19 Pandemic Shakes up the Market for New Cars,” USA
Today, August 5, 2020, at https://www.usatoday.com/story/money/cars/2020/08/05/car-prices-coronavirus-pandemic-
new-trucks-suvs/3297869001/.
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Policy Impacts on Household Finances
The initial economic policy response to the COVID-19 pandemic was swift and large, as
compared with that of previous recessions.42 This response to the economic impacts of the
pandemic have likely prevented many consumers from fal ing delinquent on their loan payments.
This section highlights two important policy impacts that influenced these trends: consumer loan
forbearance and macroeconomic policy to support households during the economic recession.
Consumer Loan Forbearance and Other Financial Policy Responses
For Americans having trouble paying their loan obligations due to the COVID-19 pandemic,
Congress, financial regulators, and financial institutions responded by providing consumers relief
options, such as loan forbearance. A consumer’s ability to get a forbearance and the types of
terms under the forbearance may be significantly influenced by what type of institution owns the
loan. These various institutions—including banks and credit unions, private nonbank financial
institutions, government-sponsored enterprises (GSEs), and the federal government—are subject
to different laws, regulations, and business considerations. As mentioned earlier, the CARES Act
establishes consumer rights to be granted forbearance for federal y backed mortgages for up to a
year (Section 4022) and for federal student loans (Section 3513), now through the end of 2020
due to administrative actions.43 The law also protects the credit histories of consumers with
forbearance agreements until 120 days after the national emergency declared by the President on
March 13, 2020, terminates (Section 4021).44 However, the act does not grant consumers loan
forbearance for other types of consumer loan obligations, such as auto loans, credit cards, private
student loans, and bank-owned mortgages. In these cases, financial institutions have discretion
about when and how to offer loan forbearance or other relief options to consumers. Therefore,
financial regulatory agencies have used existing statutory authorities to encourage loan
forbearance and other financial relief options for affected consumers.45 In response, many banks
and credit unions have announced measures to offer various forms of assistance to affected
consumers.
Forbearance, particularly mortgage forbearance, may help consumers pay other bil s. Mortgage
debt is the largest debt obligation for many families. About two-thirds of al mortgage loans in the

42 Romina Boccia and Justin Bogie, This Is How Big the COVID-19 CARES Act Relief Bill Is, T he Heritage Foundation,
April 20, 2020, at https://www.heritage.org/budget-and-spending/commentary/how-big-the-covid-19-cares-act-relief-
bill.
43 For more information on T itle IV of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L.
116-136), which contains a number of provisions aimed broadly at stabilizing the economy and helping affected
households and businesses, see CRS Report R46301, Title IV Provisions of the CARES Act (P.L. 116 -136), coordinated
by Andrew P. Scott . For more information about federal student loan debt relief in the context of COVID-19, see CRS
Report R46314, Federal Student Loan Debt Relief in the Context of COVID-19, by Alexandra Hegji.
44 For more information on the credit reporting industry, see CRS Report R44125, Consumer Credit Reporting, Credit
Bureaus, Credit Scoring, and Related Policy Issues, by Cheryl R. Cooper and Darryl E. Getter.
45 Many financial regulatory agencies have updated their guidance to help financial firms support consumer needs
during this time. Regulatory guidance does not force financial institutions to take any particular action for consumers
(such as offering loan forbearance), but it can enco urage them to offer various forms of support. For more information
on mortgage and bank regulators’ responses to COVID-19, see CRS Insight IN11316, COVID-19: Support for
Mortgage Lenders and Servicers, by Andrew P. Scott and Darryl E. Getter; and CRS Insight IN11278, Bank and Credit
Union Regulators’ Response to COVID-19, by Andrew P. Scott and David W. Perkins. In addition, the Federal Reserve
has provided liquidity to support financial markets in response to COVID-19. For more information, see CRS Insight
IN11259, Federal Reserve: Recent Actions in Response to COVID-19, by Marc Labonte.
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United States were held or insured by the federal government and, therefore, covered by the
CARES Act’s consumer right to be granted loan forbearance.46 Therefore, many Americans may
be able to access loan forbearance on their mortgage debt. For a family who lost income during
the COVID-19 pandemic, skipping monthly payments on a mortgage or other loan may al ow the
family to have enough money for food and other expenses during the month. In this way, access
to loan forbearance on one loan may help a consumer stay current on other loans, providing
needed financial relief.
Although many Americans took advantage of loan forbearance, some households affected by
COVID-19 may not have requested or received loan forbearance. Some consumers’ loans may
fal outside of those with rights under the CARES Act. In addition, many consumers may not be
aware of the forbearance or credit reporting benefits in the CARES Act, which may make it more
difficult for them to access these benefits.47 According to a Federal Reserve Bank of Philadelphia
survey, as of June 2020, less than a third of American consumers were aware of the CARES Act
right to mortgage forbearance for federal y backed mortgages and fewer were aware of the credit
reporting accommodations.48
Fiscal Policy Responses
In addition to consumer loan forbearance rights, the CARES Act also provided fiscal stimulus
that included income support for households, such as enhanced unemployment insurance and
relief checks. These income transfer programs may have helped some consumers make their
consumer credit payments on time, particularly those who lost income during the COVID-19
pandemic. Evidence suggests that these programs, along with other provisions in the CARES Act,
such as the Paycheck Protection Program, increased total personal income during the second and
third quarters of 2020.49 In fact, personal income remained higher in the third quarter of 2020
than before the pandemic began.50 This is highly unusual during a recession and likely
contributed to household debt patterns. For these reasons, some research suggests that fiscal
programs in the CARES Act may be limiting disruptions in the housing market.51
This section discusses two income transfer programs in the CARES Act—enhanced
unemployment benefits and economic impact payments—and discusses how they may have
helped some consumers meet their loan obligations.

46 For ownership of all mortgage loans in the United States, see Federal Reserve, “Financial Accounts of the United
States—Z.1, 2020: Q1 release,” June 11, 2020, at https://www.federalreserve.gov/releases/z1/. Mortgage loans held or
insured by the federal government are not reported by age of mortgage borrower.
47 Douglas Duncan, COVID-19: The Need for Consumer Outreach and Home Purchase/Financing Digitization , Fannie
Mae, Perspectives Blog, August 12, 2020, at https://www.fanniemae.com/research-and-insights/perspectives/covid-19-
need-consumer-outreach-and-home-purchasefinancing-digitization.
48 Federal Reserve Bank of Philadelphia, Consumer Finance Institute Special Report, CFI COVID-19 Survey of
Consum ers—Wave 3 Reveals Im provem ents, but Not for Everyone,” pp. 11-13, 31, at https://www.philadelphiafed.org/-
/media/covid/cfi/cfi-covid-19-survey-of-consumers-wave3-updates.pdf.
49 For more informat ion on the Paycheck Protection Program (PPP), see CRS Report R46397, SBA Paycheck
Protection Program (PPP) Loan Forgiveness: In Brief, by Robert Jay Dilger and Sean Lowry.
50 For more information about the effect of policy on personal income during COVID-19, see CRS Report R46606,
COVID-19 and the U.S. Econom y, by Lida R. Weinstock; and CRS In Focus IF10501, Introduction to U.S. Economy:
Personal Incom e, by Lida R. Weinstock.
51 Chris Cunningham and Kris Gerardi, COVID-19 Mortgage Relief—The Role of Income Support, Federal Reserve
Bank of Atlanta, MacroBlog, May 27, 2020, at https://www.frbatlanta.org/blogs/macroblog/2020/05/27/covid-19-
mortgage-relief-the-role-of-income-support.
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Enhanced Unemployment Benefits
Families with unemployed workers may be the most likely to have trouble paying their bil s
during the pandemic. Unemployment insurance can substitute for lost income and help families
meet payment obligations.
As Americans became unemployed at historic rates, Congress enhanced federal unemployment
benefits in the CARES Act, providing unemployed workers with more support for an extended
period of time, beyond what the worker would normal y be eligible to receive. The act provided a
weekly supplemental payment of $600 to those receiving benefits through the end of July and
extended unemployment insurance benefits for 13 weeks. In addition, the act provided
unemployment benefits to some not normal y eligible for unemployment insurance.52 Estimates
suggest that most workers received at least as much in benefits as they lost in wages.53
Following the expiration of the enhanced unemployment benefits at the end of July, President
Trump issued a memorandum on August 8, 2020, which cal ed on his Administration to approve a
lost wages assistance program that would authorize state governors to provide $400 per week,
$300 of which would be provided by the federal government as long as disaster relief funds last.54
These unemployment benefits likely made it possible for some families with an unemployed
worker to pay their bil s during the spring and summer of 2020.
Economic Impact Payments
The CARES Act also provided one-time direct payments to households equal to $1,200 per adult
individual and $500 per child, with amounts phased out for higher-income taxpayers.55 Payments
began in April 2020.56 According to the IRS, more than 160 mil ion economic impact payments
were delivered by August 14, 2020.57 Economic impact payments constituted more than 12% of
total personal income in the United States in April 2020.58

52 For more information on the unemployment insurance provisions in the CARES Act, see CRS In Focus IF11475,
Unem ploym ent Insurance Provisions in the CARES Act, by Katelin P. Isaacs and Julie M. Whittaker.
53 Peter Ganong, Pascal Noel, and Joseph Vavra, US Unemployment Insurance Replacement Rates During the
Pandem ic, University of Chicago, Becker Friedman Institute for Economics, Working Paper no. 2020-62, August 24,
2020.
54 U.S. President (T rump), “Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster
Declarations Related to Coronavirus Disease 2019,” Weekly Compilation of Presidential Documents, August 8, 2020.
For more information on this memorandum, see CRS Legal Sidebar LSB10532, President Trum p’s Executive Actions
on Student Loans, Wage Assistance, Payroll Taxes, and Evictions: Initial Takeaways, by Kevin M. Lewis, Sean M.
Stiff, and Jay B. Sykes.
55 For more information on the direct payments to individuals in the CARES Act, see CRS Insight IN11282, COVID-19
and Direct Paym ents to Individuals: Sum m ary of the 2020 Recovery Rebates/Econom ic Impact Payments in the CARES
Act (P.L. 116-136), by Margot L. Crandall-Hollick.
56 U.S. Congress, House Committee on Ways and Means, Expected Timeline for Economic Impact Payments, 116th
Cong., April 16, 2020, at https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/
2020.04.16%20Rebate%20Payment%20Timeline%20FINAL.pdf .
57 Internal Revenue Service, “IRS takes new steps to ensure people with children receive $500 Economic Impact
Payments,” press release, August 14, 2020, at https://www.irs.gov/newsroom/irs-takes-new-steps-to-ensure-people-
with-children-receive-500-economic-impact-payments.
58 Bureau of Economic Analysis, Effects of Selected Federal Pandemic Response Programs on Personal Income, June
2020, July 31, 2020, at https://www.bea.gov/system/files/2020-07/effects-of-selected-federal-pandemic-response-
programs-on-personal-income-june-2020.pdf.
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Current research suggests that many consumers used their impact payments to pay monthly bil s
or pay down debt. A National Bureau of Economic Research working paper using a large-scale
survey of consumers found that 52% of respondents said they used the funds to pay down debt,
33% said they mostly saved it, and 15% said they spent or planned to spend most of it.59 Those
who reported using the economic impact payments to pay off debts were more likely to be
unemployed, have COVID-19-related earnings losses, or have a mortgage, compared with other
groups. On average, individuals reported spending around 40% of the payment, but this rate was
higher for those facing liquidity constraints, unemployed, living in larger households, less
educated, and who received payments of less than $1,200.
Fiscal Stimulus During a Recession
Consumer spending is a key driver of short-run economic growth in the U.S. economy. As happened with the
COVID-19 pandemic, significant drops in consumer spending can cause drops in aggregate demand (overal
spending), of which consumer spending is a significant component. Such a fal in aggregate demand wil general y
result in slower wage growth, decreased employment, lower business revenue, and lower business investment.
Lost jobs and wage income can cause more reductions in consumer spending, leading to a more severe recession.
Conventional macroeconomic theory general y supports the use of fiscal stimulus in the form of short -term
government spending increases or tax decreases designed to temporarily spur economic activity.60 According to
this theory, fiscal stimulus can mitigate the decline in aggregate demand, reduce employment gaps, and guide the
economy back to the ful -employment more quickly than would otherwise occur. Fiscal policy, such as taxes and
transfers, can directly support a household’s income. Fiscal policy also affects household income and spending
indirectly, through its effect on aggregate demand, leading to reduced unemployment and higher income. In these
ways, fiscal stimulus can help a household sustain its regular spending and more easily pay its loan obligations.
Future Household Finance Outlook
During the summer of 2020, some industry reports described declines in consumer loan
forbearance requests in mortgage, auto, credit card, and other consumer credit markets.61
However, it is unclear whether this pattern wil continue. Future economic projections look
uncertain, as it is difficult to predict the trajectory of future COVID-19 outbreaks and their
subsequent economic impacts. This section of the report discusses major uncertainties relating to
the outlook for household debt and consumer credit markets. The first subsection describes
current macroeconomic uncertainties; the second subsection discusses the importance of future
public policy; and the last subsection discusses uncertainties in consumer credit markets.
Future Macroeconomic Outlook Uncertainty
The path of economic recovery from the COVID-19 pandemic is highly uncertain. The economic
outlook is largely being driven by a public health crisis that is, in and of itself, difficult to predict.
To a large extent, the economy is unlikely to fully recover until the pandemic has ended. Fears of
the virus and social distancing measures make it unlikely that commerce can regain its pre-
pandemic pace while COVID-19 stil poses a threat. Workers in certain industries, such as retail,
restaurant, and travel, may not recover their jobs until local health regulations allow normal

59 Olivier Coibion, Yuriy Gorodnichenko, and Michael Weber, “How Did U.S. Consumers Use T heir Stimulus
Payments?” National Bureau of Economic Research, Working Paper no. 27693, August 2020, pp. 2 -3.
60 For more information on fiscal policy, see CRS In Focus IF11253, Introduction to U.S. Economy: Fiscal Policy, by
Lida R. Weinstock; and CRS Report R45723, Fiscal Policy: Econom ic Effects, by Marc Labonte.
61 Jon Prior, “PNC sees Steep Decline in Forbearance Requests. Will it Last?” American Banker, July 15, 2020; and
Jim Dobbs, “Big Banks Keeping Consumer Loan Losses in Check, at Least for Now,” American Banker, July 14, 2020.
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operations and consumers demand these services again. Therefore, economic activity may depend
on factors such as when a vaccine wil be readily available or advances in treatment. In this case,
forecasting when employment wil recover may be difficult. Yet current projections suggest
possible long-run economic impacts. The Congressional Budget Office (CBO) forecasts, as of
July 2020, that both real gross domestic product wil remain below its potential and the
unemployment rate wil remain above the 2019 rate for the remainder of the decade (i.e., through
2030).62 The forecast assumes no policy changes and is subject to change. Other forecasts are
more optimistic about the rate of recovery, although they also suggest that the effects of COVID-
19 on unemployment may be long lasting.63
Future Public Policy Uncertainty
Future public policy wil affect the course of the economic recovery general y and developments
in household debt markets more specifical y. Mortgage and student loan forbearance programs
are stil in effect, but when these programs expire, some consumers may fal delinquent on their
loans. In addition, many CARES Act fiscal policy provisions have expired or been exhausted, and
personal income has general y declined since April. 64 The July expiration of the CARES Act’s
supplemental unemployment insurance payments could result in more consumers eventual y
being unable to stay current on their loans. President Trump’s memorandum extends a lower
supplemental payment for some unemployed workers, but reports suggest that these supplemental
payments started to expire as of the end of August in some states.65 For example, a recent research
study suggests that in August, without the benefit supplement, many unemployed workers may
have depleted their savings and reduced their spending.66
Some families losing unemployment insurance funds may have more trouble paying their
monthly consumer loan obligations with a reduced benefit.67 Industry reports suggest concerns
about future delinquencies or defaults on consumer loans without additional government

62 Congressional Budget Office, An Update to the Economic Outlook: 2020 to 2030, July 2, 2020, at
https://www.cbo.gov/publication/56442.
63 For example, see Board of Governors of the Federal Reserve System, FOMC Economic Projections, June 10, 2020,
at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20200610.pdf; and Wall Street Journal, Econom ic
Forecasting Survey, June 1, 2020, at https://www.wsj.com/graphics/econsurvey/. For more information on the current
unemployment rate outlook, and what those changes would mean for the economy, see CRS Insight IN11460, COVID-
19: How Quickly Will Unem ploym ent Recover? , by Lida R. Weinstock.
64 For more information about the effect of policy on personal income during COVID-19, see CRS Report R46606,
COVID-19 and the U.S. Econom y, by Lida R. Weinstock; and CRS In Focus IF10501, Introduction to U.S. Economy:
Personal Incom e, by Lida R. Weinstock.
65 Jeff Stein and Eli Rosenberg, “T rump’s $300 Unemployment Funding is Already Running Out, Leaving Millions in
Crisis Again,” Washington Post, September 11, 2020; and Elisabeth Buchwald, “More than 30 States are Preparing to
Distribute an Extra $300 in Unemployment Benefits—But How Long Will that Last?” MarketWatch, August 31, 2020
at https://www.marketwatch.com/story/more-than-30-states-have-distributed-an-extra-300-in-unemployment-benefits-
but-how-long-will-that -last-2020-08-27.
66 Diana Farrell et al., The Unemployment Benefit Boost: Trends in Spending and Saving when the $600 Supplement
Ended, JPMorgan Chase & Co. Institute, Policy Brief, October 2020, at https://institute.jpmorganchase.com/content/
dam/jpmc/jpmorgan-chase-and-co/institute/pdf/Institute-UI-Benefits-Boost -Policy-Brief_ADA.pdf.
67 Economists from Goldman Sachs estimated that the expiration of the $600 supplemental payment could result in a
$70 billion hit to personal income in August, with the additional $300 benefit possibly covering up to $35 billion of
that, if fully implemented in August. If personal income was lowered by the full $70 billion, economists estimate this
would translate to a reduction in consumer spending p ower by about 6.5% of personal consumption expenditures (PCE)
in August. Blake T aylor, “US Daily: T he New $300 Benefit: T oo Little T oo Late for August Spending,” Goldman
Sachs Econom ics Research, August 23, 2020.
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stimulus, such as unemployment aid.68 CBO stated that “if the additional $600 per week was
extended ... the extension would al ow people to make more payments on loans and therefore
have greater access to credit in the future than they would have otherwise.”69
Congress is currently debating whether COVID-19 pandemic relief provisions should be
extended or whether the cost of these proposals outweigh their benefits.70 Active legislation that
would modify, extend, or create new stimulus programs includes
 the Heroes Act (first version: H.R. 6800; second version: H.R. 925) in the House,
which first passed on May 15, 2020, then again on October 1, 2020; and
 the American Workers, Families, and Employers Assistance Act (S. 4318) in the
Senate, which was introduced on July 27, 2020.
Both bil s include additional relief payments to individuals71 and additional unemployment
insurance benefits.72 In addition, the Heroes Act would expand consumer rights to loan
forbearance and other payment relief during the COVID-19 pandemic.73
Consumer Credit Market Uncertainty
Promoting loan forbearance as a solution for consumers having trouble meeting their loan
obligations made sense when the COVID-19 pandemic was expected to be short-lived. However,
if the economic impacts of the COVID-19 pandemic persist for a longer period of time, then loan
forbearance may only be delaying consumers from becoming delinquent and defaulting on their
loans, rather than preventing this outcome. If so, consumers may not be able to avoid the serious
consequences of loan default, such as debt collection, foreclosure, car repossession, or wage
garnishment.
For lenders, if the economic impacts of the COVID-19 pandemic continue to cause prolonged
disruptions and the CARES Act rights to loan forbearance expire, lenders may find that
voluntarily extending loan forbearance becomes a less viable option. Questions exist about
whether deferrals wil become current or whether they wil eventual y need to be charged off.74
Large numbers of missed consumer loan payments—due to forbearance or delinquency—could

68 Jon Prior, “Lenders Fear Mass Defaults Unless Unemployment Benefits are Extended,” American Banker, July 23,
2020.
69 Phillip L. Swagel, Economic Effects of Additional Unemployment Benefits of $600 per Week, Congressional Budget
Office, June 4, 2020, pp. 4-5, at https://www.cbo.gov/system/files/2020-06/56387-CBO-Grassley-Letter.pdf.
70 For more information about the economic impact of COVID-19 pandemic relief provision extensions, see CRS
Insight IN11475, Econom ic Activity and the Expiration of COVID-19 Relief Provisions, by Grant A. Driessen and Lida
R. Weinstock.
71 For more information on relief payments to individuals in these bills, see CRS Insight IN11397, COVID-19:
Sum m ary of the Direct Paym ents Proposed in the Heroes Act (H.R. 6800) , by Margot L. Crandall-Hollick; CRS Insight
IN11473, COVID-19: Sum m ary of Direct Paym ents in the Am erican Workers, Fam ilies, and Em ployers Assistance Act
(S. 4318), by Margot L. Crandall-Hollick; and CRS Insight IN11513, COVID-19 and Direct Paym ents to Individuals:
Com parison of Recent Proposals for a Second Round of Paym ents, by Margot L. Crandall-Hollick.
72 For more information on different unemployment insurance legislative proposals, see CRS Report R45478,
Unem ploym ent Insurance: Legislative Issues in the 116th Congress, by Julie M. Whittaker and Katelin P. Isaacs.
73 For more information, see CRS Insight IN11405, Heroes Act (H.R. 6800/H.R. 925): Selected Consum er Loan
Provisions, by Cheryl R. Cooper.
74 For example, some lenders are interested in how public policy may impact consumer debt repayment patterns. See
Bruce Cundiff, Forbearance and Deferrals m ay Influence the Debt Paym ent Hierarchy, Visa, Visa Business and
Economic Insights, June 2020, at https://usa.visa.com/dam/VCOM/regional/na/us/partner-with-us/documents/payment -
hierarchy-insight-june-2020.pdf.
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have significant negative consequences for financial institutions and the financial system that
affects the future availability of credit.75 It is unclear, however, if the share of household debt at
risk of default may be enough to pose systemic risk to the financial system.76
In addition to impacts on current loans, CARES Act protections related to the credit reporting
system may also impact consumers’ ability to access credit in the future, possibly in positive and
negative ways. Consumers can harm their credit scores when they miss consumer loan payments,
and lower credit scores can impact their access to future credit.77 Section 4021 of the CARES Act
requires financial institutions to report to the credit bureaus that consumers are current on their
credit obligations if they enter into an agreement to defer, forbear, modify, make partial payments,
or get any other assistance on their loan payments from a financial institution and fulfil those
requirements.78 Before this law was enacted, lenders could choose whether to report loans in
forbearance as paid on time; with this law, the option is no longer voluntary for the lender.79
Although this CARES Act protection al ows consumers with loan forbearance agreements to
protect their on-time credit histories, the provision may also lead to some unintended
consequences.80 Financial institutions may find credit scores less predictive of whether a
consumer is currently creditworthy, in part due to deferrals being treated the same as on-time

75 For more information on banks’ exposure to consumer loan defaults during the COVID-19 pandemic, see CRS
Insight IN11336, Bank Exposure to COVID-19 Risks: Mortgages and Consum er Loans, by David W. Perkins and Raj
Gnanarajah. For more information on banking developments during Q2 2020, see CRS Insight IN11500, COVID-19
Im pact on the Banking Industry: Conditions in the Second Quarter of 2020, by David W. Perkins and Raj Gnanarajah.
For a broader overview of banking industry risks and policy responses during the COVID -19 pandemic, see CRS
Report R46422, COVID-19 and the Banking Industry: Risks and Policy Responses, coordinated by David W. Perkins.
76 A Wells Fargo report estimates that approximately 6% of household debt outstanding may be at risk. See Jay Bryson,
T im Quinlan, and Shannon Seery, Household Debt at Risk Am id Job Losses, Wells Fargo Securities, Economics Group:
Special Commentary, August 26, 2020, at https://www.wellsfargo.com/com/insights/economics/special-reports/.
77 For more information on the credit reporting industry, see CRS Report R44125, Consumer Credit Reporting, Credit
Bureaus, Credit Scoring, and Related Policy Issues, by Cheryl R. Cooper and Darryl E. Getter.
78 T he covered period for this section starts on January 31, 2020, and extends to the later of 120 days after enactment or
120 days after the national emergency declared by the President on March 13, 2020, terminates. If the consumer were
delinquent before the covered period, then the furnisher would maintain the delinquent status unless the consumer
brings the account or obligation current. For more information, see CFPB, Statem ent on Supervisory and Enforcem ent
Practices Regarding the Fair Credit Reporting Act and Regulation V in Light of the CARES Act, April 1, 2020, at
https://files.consumerfinance.gov/f/documents/cfpb_credit -reporting-policy-statement_cares-act_2020-04.pdf.
79 Some consumers may still experience harm to their credit record because the CARES Act does not give consumers a
right to be granted forbearance for many types of consumer loans. Although many financial institutions have
announced efforts to provide assistance to affected consumers, lenders have discretion whether to enter into an
assistance agreement with an individual consumer. T herefore, the ability of consumers to protect their credit scores
could vary. Before the CARES Act passed, lenders had various options to mitigate the impact on consumers’ credit
scores and future credit access following disasters or catastrophic events. For example, furnishers may use special
codes to report delinquencies due to special circumstances. See CFPB, Natural Disasters and Credit Reporting:
Quarterly Consum er Credit Trends, November 2018, at https://files.consumerfinance.gov/f/documents/bcfp_quarterly-
consumer-credit-trends_report_2018-11_natural-disaster-reporting.pdf. In addition, if lenders and consumers enter into
loan forbearance agreements, then furnishers have the option to report to the credit bureaus that these consumers are
current on their credit obligations.
80 Section 4021 of the CARES Act requires loan forbearances to be reported to the credit bureaus in the same way, but
“it does not address how model developers or individual lenders treat any particular variables or information on the
back end.” See FinRegLab, Covid-19 Credit Reporting & Scoring Update, Research Brief, July 2020,
https://finreglab.org/wp-content/uploads/2020/07/FinRegLab-Research-Brief-Covid-19-Credit-Reporting-Scoring-
Update.pdf (hereinafter FinRegLab, Covid-19 Credit Reporting & Scoring Update, July 2020).
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payments.81 This situation could make it more difficult for consumers to access new credit,
particularly those currently meeting their loan obligations.82
So far, most of the response to the COVID-19 pandemic in consumer debt markets has focused on
helping consumers make existing debt payments, rather than focusing on access to credit, as the
pandemic is ongoing. Evidence suggests that credit markets have already tightened and it may be
more difficult for consumers to access new credit now than before the pandemic. According to the
CFPB, new credit applications dropped dramatical y between the first and last weeks of March
2020, as “auto loan inquiries dropped by 52 percent ... new mortgage inquiries dropped by 27
percent, and revolving credit card inquiries declined by 40 percent.”83 According to the Federal
Reserve’s senior loan officer survey in the summer and fal of 2020, banks tightened credit
standards for al types of household lending, including mortgages, credit cards, and auto loans.84
Therefore, consumers may have needed higher credit scores, larger down payments, or other
more stringent requirements to qualify for new credit. In addition, in the credit card market,
although evidence suggests limited reductions in credit card limits, the COVID-19 pandemic has
likely led to more credit card account closures and fewer credit-limit increases.85 While some
creditors may be tightening standards across the board over concerns that mandatory credit
reporting provisions may result in inaccurate assessments of credit risk,86 others argue that
broader macroeconomic uncertainties may be driving this trend.87 For example, some lenders may
be reluctant to make new loans given that many borrowers could stil be vulnerable to potential
job losses and need future forbearance, which generates costs for lenders. If limited access to
credit continues, it could make it more difficult for consumers to buy homes, cars, or other large
purchases, harming the economic recovery.

Author Information

Cheryl R. Cooper, Coordinator
Lida R. Weinstock
Analyst in Financial Economics
Analyst in Macroeconomic Policy

Maura Mullins

Research Librarian

81 Current macroeconomic uncertainties may also make credit scores less predictive of future consumer defaults. See
AnnaMaria Andriotis, “‘Flying Blind Into a Credit Storm’: Widespread Deferrals Mean Banks Can’t T ell Who’s
Creditworthy,” Wall Street Journal, June 29, 2020.
82 FinRegLab, Covid-19 Credit Reporting & Scoring Update, July 2020, p. 7.
83 Éva Nagypál, Christa Gibbs, and Scott Fulford, The Early Effects of the COVID-19 Pandemic on Credit
Applications, CFPB, CFPB Office of Research Special Issue Brief, April 2020, p. 1, at
https://www.consumerfinance.gov/data-research/research-reports/covid-19-early-effects-credit -applications/.
84 Board of Governors of the Federal Reserve System, Senior Loan Officer Opinion Survey on Bank Lending Practices,
July and October 2020, at https://www.federalreserve.gov/data/sloos.htm.
85 Ryan Sandler and Judith Ricks, Household Debt and Credit , August 2020, p. 3; and Larry Santucci, How Has the
COVID-19 Pandemic Affected the Supply of Consumer Credit?: A Preliminary Look at the U.S. Credit Card Market,
Federal Reserve Bank of Philadelphia, Consumer Finance Institute Special Report, August 2020, p. 3, at
https://www.philadelphiafed.org/-/media/covid/cfi/cfi-credit-cards-and-covid-19.pdf.
86 FinRegLab, Covid-19 Credit Reporting & Scoring Update, July 2020, p. 7.
87 FinRegLab, Covid-19 Credit Reporting & Scoring Update, July 2020, p. 16.
Congressional Research Service
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COVID-19: Household Debt During the Pandemic

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Congressional Research Service
R46578 · VERSION 3 · UPDATED
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