Money Rehab with Nicole Lapin - The Small Oversight That Could Bankrupt You

Episode Date: June 7, 2023

Flood insurance. It sounds super boring and a "not now" issue, but it's actually a huge deal that could f*ck you over. Nicole explains how floods are simultaneously getting more common and harder to insure. Plus, Nicole breaks down the latest on Pride backlash and what student loan borrowers need to get in order before August.

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money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. It's time for some money rehab. It's officially summer, but what's the vibe this year? I mean, I personally want to drink spicy marks by the pool and talk about just about anything other than the debt ceiling. So I guess at least it's not a hot government default summer.

That's good. But what can we expect, seriously, from the next quarter? In this weekly headline roundup, we're going to talk about three stories that may end up defining the summer, financially speaking. Let's start with student loan repayments, or I know what you owed last summer. All right, actually, Mia Culpa, we do need to quickly talk about the debt ceiling to give some context on this one. The new debt ceiling deal officially ended the pause on student loan repayment. Payments will need to resume 60 days after June 30th, which I don't know why the government does it this way. It's like, what the heck date is that? Carry the one. That is the week of August 28th. This is about when

the Biden administration was planning on ending it officially anyway. So now it has been made officially official. So if you were someone whose loans were on pause, what does this mean for you? First of all, you're going to get a notice about three weeks before payment requirements unfreeze. So the first or second week of August, and then you need to start paying again. The good news is that these loans haven't been earning interest during the pause, but interest will start accumulating on your debt again at the end of August, so now is the time to make tweaks to your spending plan to make sure you have the debt payments covered. We should have a Supreme Court decision about student loan forgiveness before

repayment starts, but in case we don't, the safe move is to budget as if you're gonna have to pay the whole thing back. Now, if you had automatic payments set up before the pause, this is super important. You need to opt back in. I repeat, if you had auto pay set up for your student loans, you probably don't anymore. You need to get auto pay back up and running, and please don't miss a payment because you forget to do this. You can also negotiate a new payment plan if your financial circumstances have changed. There are two types of repayment plans available. One is income-driven payment plans. These plans calculate your payments based on your income and your family size. But be aware that these plans are a little in flux right now. There is pending legislation that would make these plans more generous to low-income families.

That legislation sent for review on May 23rd, which means that the new guidelines should be out right before the payment pause ends. I hate these buzzer beaters, but here we are. The second option is fixed payment plans, which have you paying a set amount every month. Remember, you can start making payments before the interest starts again. I mean, you can start right this very second. This gives you actually a chance to pay down just the principal on your loan, which means paying less over the life of the loan.

So if you can make it work, I would. This student debt story is very much evolving between waiting on legislation, waiting on the Supreme Court, and waiting to see how it all rolls out. It's a lot of hurry up and wait. It's not my favorite because it means that people with student debt can't accurately plan for the future. And the irony there is that by taking out student debt, they were trying to better plan for their future. But I promise I will do whatever I can to make the transition easier and keep you up to date as we get more details. Here's the second story, the climate crisis. Now, there's long been an argument that the climate crisis is a moral crisis and that humans have the responsibility to fix it.

And as a pretty progressive lady myself, I believe that is true. But even if you don't believe climate change is caused by us, you can't argue with the idea that the climate crisis is fast becoming a financial crisis. It's hard to deny the mounting costs of storms and fires. These rising costs have actually just led to two major insurance companies in California, Allstate and State Farm, to stop selling new policies. In unpacking this story, the first thing we need to understand is that the costs have gone up. This has been caused by a couple of things. First, property values have gone up, way up, meaning that the total value of new policies is also greater.

But it's not just the cost of existing buildings that has increased. The cost of building new structures has gone up as well. This is mostly because in a lot of places, notably California, there are pretty strict building codes designed to make new buildings more durable in the face of natural disasters. But building a better building takes more money. And that ties into the third and final reason that insurance companies are having to make bigger payments, construction costs. So for labor and materials, they are higher than ever. Not being able to get insurance is a pretty new situation in California. But for other parts of the country, they have faced this challenge before. Florida has

been dealing with this since 1992, when Hurricane Andrew bankrupted insurance companies across the state. Florida is a wealthy state, so it was able to cobble together programs and attract new insurance companies to take on the risk. But not all states have that literal luxury. Louisiana residents, for example, struggle to buy private insurance, but the state also lacks resources to create its own program and there aren't enough expensive homes with huge premiums to attract new companies in the state. Now, you might think that the federal government would swoop in and help out, right? I mean, isn't that what FEMA, the Federal Emergency Management Agency, is for? I've got

some bad news on this one. They're in a debt crisis that the federal government hasn't fixed. Since Katrina, the National Flood Insurance Program has been in debt to the United States Treasury. The debt is currently sitting at $20.5 billion, and the interest alone on the debt is $280 million. In an attempt to balance their budget, the National Flood Insurance Program is raising rates for flood insurance, but federal law prevents them from raising rates faster than 18% a year. 18% is still a humongous increase if you're the one paying it, but it doesn't come close to covering the amount that they currently owe and the projected costs in the future. So what can you do in the midst of all this news to protect your home? Well, when it comes to flood insurance, if you already own a home, unfortunately

not very much. If you're buying a home, check the FEMA flood maps for the area, any state flood maps for that area, and ask the seller if the home has ever been flooded. If you live in a state or are buying in a state where it's difficult to get private coverage, look for a state plan. These can be a little more difficult to enroll in, but they can provide protection that you might not be able to buy on the private market. California offers the fair plan. Their coverage is much more expensive than private coverage, but they're an okay last resort. If you rent, be aware that your renter's insurance policy almost never protects you from water damage from existing flooding. If a pipe bursts, renter's insurance has got you covered. If the creek in the area rises, not so much. To be protected from a flood as a renter, you need to buy contents

coverage from the National Flood Insurance Program. And fun fact, the NFIP is super picky about what it will cover in your basement. Anything that's part of your house, like a hot water heater, is covered, as are most things that are plugged in, like washing machines and freezers. But anything else in the basement that isn't explicitly listed in the policy is not covered. So if you're storing, oh, I don't know, a Chanel bag down there for some reason, either move it to the attic or get it listed on your policy. Because summer is not just for hot girls or nerd girls. It's also, sadly, for wildfires and hurricanes. The kickoff to summer is also for Pride Month. Now that it's June, it's Pride Month, but this may be backlash summer for that, which is not so hot. In prior years, corporate tendency

to slap a rainbow on anything and call it pride has always been a sort of uncomfortable balance. Is it true support or is it rainbow washing? Well, brands across the spectrum have been tested this spring. It started with the Bud Light backlash over their decision to work with a trans influencer. The latest brand to face customer criticism for celebrating Pride is Target. Target has long sold Pride products during June and most of the criticism has been of the rainbow washing flavor. and most of the criticism has been of the rainbow washing flavor. But now, for the first time, Target is facing serious backlash against the sale of Pride-branded merch in the form of customers not just complaining on social media, but also trashing displays and threatening employees.

This comes at a time when retail workers are experiencing more threats to their personal safety than ever. Target has a difficult line to walk to protect their employees, but also to show that their support of Pride is more than just a marketing campaign. It's a meaningful commitment to equal rights. So maybe after all of this, this summer is actually the summer of standing up for what you believe in. I hope it is. For today's tip, you can take straight to the bank. If you moved since the pause on student loans started, you need to make sure that your loan provider can find you. I know

it's tempting to think you can just move, not tell your lender, and then not pay back the money and live happily ever after. But sadly, that's not how it works. If you don't know who your loan provider is, you can go to studentaid.gov and then go to the Manage Loans section to find out. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Levoy. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me.

And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.