Written By Travis Hornsby, CFA®, CFP®
We did another survey of the 20,000-plus people on our email list this past week. Over 3,000 sent back a response, and the findings aren’t what we expected.
For background, we did a similar survey in mid-March when coronavirus was just starting to rear its ugly head.
The change in what’s going on with the economy and in individual lives since then is fascinating. Different professions had very different opinions about how and when the economy should reopen.
Before we dive into the survey data, I want to talk about the Paycheck Protection Program (PPP) and whether you should apply for that if you missed out on the first round of funding.
The Paycheck Protection Program (PPP)
To offset some economic damage of the coronavirus, the government released two loan programs for small businesses as part of the stimulus package.
The Paycheck Protection Program (PPP) is important for small business owners. There’s also the Economic Injury Disaster Loan (EIDL), which might be better for solopreneurs.
PPP’s rocky beginnings
Because Congress put a price tag on the program of $350 million, businesses rushed to get their applications in before the money ran out.
Several lenders gave big businesses preferential treatment. Ruth’s Chris Steakhouse, Shake Shack, and Pot Belly Restaurant Group all applied and were given millions of dollars each.
Those aren’t companies you’d consider a small business, which is what the PPP program was designed for. They got some backlash from the public.
But it’s not the fault of the businesses. The fault lies with Congress. Congress created the loan program in a way that made sense for larger companies to apply.
Should you apply for PPP?
In our survey, only about 15% of business owners who responded said they were approved.
If you didn’t apply or weren’t approved in the first round, Congress is releasing “round two” which will make additional funds available for small businesses.
The real question is: should you apply for PPP .
The loan allows you to replace two months of your employees’ wages. At least 75% of the funds should be used for payroll.
If you apply and get approved, we’re telling people to accept the funds. It essentially works out to be a grant when used for employee payroll.
But part of your decision depends on what you pay your employees. I’ve seen several cases where workers are making more money on unemployment and don’t want to go back to work.
If your employees are making somewhere in the $50,000 to $60,000 range and your state unemployment benefits aren’t that great, taking the PPP loan might make sense. Paying your staff their wages could put them in a better financial position than relying on unemployment.
There’s also a lot of uncertainty that makes it hard to decide.
To all the business owners out there, my only advice is to survive. If you can survive through this period, things will be fine.
How long should the economy stay closed?
One question I found especially fascinating from the survey was how long we should keep the economy closed.
Overall, respondents gave responsible answers. About 46% said the economy should remain closed for as long as it takes to put this crisis behind us.
The answer was drastically different for respondents who lost their income completely. This group is 44% more likely to want the economic shutdown to end in two months or less.
We also saw professions that have had income cuts but not mass layoffs, like physicians and pharmacists, be more supportive of keeping the economy closed for as long as it takes.
The tolerance of social distancing and the economic shutdown among different professions will be interesting to monitor going forward.
Will there be a trend of professionals, in general, being more supportive of social distancing policies to flatten the curve, keeping the economy shut down, and doing this quarantine thing we're all going through right now?
I don’t know. But based on this data, I don't think optometrists and dentists are necessarily more conservative than physicians and pharmacists.
If physicians have massive layoffs, the survey results suggest that physicians would say they’re willing to take a risk by reopening the economy. Whether that’s right or wrong, I don’t know. But it’s what our survey data suggests.
The impact of coronavirus on dentists vs. physicians
Coronavirus is having a massively different effect on income between professions, with dentists being hit the hardest.
Our survey found that 56% of dentists aren’t getting any income at all.
To put that into context, let’s compare it to physicians. Only 1% of physicians lost their income and about 20% have had a very large drop in pay.
There are different kinds of pain that everyone is experiencing during the pandemic. Some people are being obliterated with their professions, while others are not that affected.
For instance, government employees and lawyers were very unaffected by the closed economy.
But some professions were more affected than I thought they would be. For example, mid-level providers like nurses, nurse practitioners, and PAs seem to be getting hit hard, especially when compared to physicians.
Pharmacists may soon feel the effects
Overall, pharmacists have had little impact since the coronavirus began, with 88% of pharmacists reporting no change in pay.
Business has slowed down considerably, according to one reader, who said,
“The pharmacy was incredibly busy at the beginning of the pandemic, but prescriptions have slowed greatly. By this time on a Friday, I am typically on my 300 to 400th prescription and I have not hit 200 yet today. I worry that my hours will get cut to keep the business afloat.”
The future of the CARES Act and student loan payments
A group of higher education institutions, including the American Association of Universities, Association of Community Colleges, and the National Association of Student Financial Aid Administrators, are proposing big changes to student loans under the CARES Act.
They want Congress to expand and extend the zero-interest and zero-payments to June 2021 and to lower interest rates. Instead of the average 7% interest, which is high by today’s standards, the institutions are asking the government to charge 1.5%.
It’s a proposal at this point – nothing has been done to show this will happen. But I asked our Facebook group about it, and people were wildly in favor of the changes.
I don’t know if Congress will extend the payment suspension past September 30 or not. I think it’s likely since we’re coming up on an election year.
No matter what happens, we’ll keep you informed.
In the meantime, if you want a plan for your student loans, we’re here for you. The CARES Act has a lot of moving parts and a student loan plan can make sure you’re getting it right.
Not sure what to do with your student loans?
Take our 11 question quiz to get a personalized recommendation for 2024 on whether you should pursue PSLF, Biden’s New IDR plan, or refinancing (including the one lender we think could give you the best rate).
