Monthly Child Tax Credit Payments Helped Parents Avoid Selling Plasma and Taking Payday Loans

Monthly cash payments from the federal government last year may have helped some parents avoid taking out payday loans or selling their blood plasma in order to pay bills.

By: Arthur Delaney

See original post.

Parents who’d previously used such “alternative financial services” were less likely to do so again after the child tax credit checks started flowing, according to a new report published with the Global Economy and Development program at the Brookings Institution by researchers at the Social Policy Institute at Washington University in St. Louis and Appalachian State University.

The researchers found that 5.3% of CTC-eligible parents borrowed from payday lenders before the payments started in July but did not do so again, while only 3.3% of households in a control group similarly stopped borrowing from payday lenders.

Since 36 million households received the monthly child tax credit benefits, that means nearly 2 million households may have ditched payday loans, which bear high interest rates and in some states can roll over into another loan if the borrower fails to pay.

“We noticed a significant drop in families undertaking risky and damaging measures to close their budgets, like payday or pawn shop loans, selling of blood plasma, etc., in addition to much better eating habits,” said Greg Nasif, a spokesman for Humanity Forward, the progressive group that sponsored the research. “This study confirms that monthly CTC payments help families not only with their long-term financial health, but their personal health as well.”

Democrats in Congress created the child tax credit to cut child poverty and reduce material hardship for parents. For the six months the benefit existed, American parents enjoyed the kind of child allowance that other advanced countries have provided for decades.

The economic impact of the payments, however, has received relatively little attention in Washington amid concerns over soaring inflation, which afflicts a much broader swath of the population than just parents of minor children.

The researchers surveyed a sample of eligible parents and a control group in July, when the payments started, and did a follow-up survey of recipients and non-recipients in December and January, after the payments stopped.

The advance monthly child tax credit payments, worth as much as $300 per child, may have prompted parents to reconsider pawnshop loans and plasma donations. Child tax credit recipients who had sold blood plasma before the payments started were twice as likely as non-recipients to say in the follow-up survey they had not sold plasma again (4.8% vs. 2.6%).

Parents who had not taken out payday loans or sold plasma in the six months before the payments started, however, were still as likely as the control group to use the quick cash schemes despite receiving the child tax credit payments.

The research also suggested the CTC afforded parents stronger rainy day funds, healthier meals and lower risks of evictions. It adds to a growing body of evidence hinting the monthly payments, which went out from July through December last year, made life easier for tens of millions of parents.

The Columbia Center on Poverty and Social Policy, for instance, estimated that the payments reduced child poverty by nearly 30%, and that the decline reversed as soon as the payments stopped in January.

Democrats had intended for the expanded child tax credit to become a permanent fixture of the welfare state, one that parents would rely on the way seniors rely on Social Security retirement benefits. But their plans to entrench the policy fell apart when they couldn’t muster even 50 Senate votes for a bill to continue the payments as part of a broader package last year.

Republicans generally opposed the payments, deriding the money as “welfare” and saying the government shouldn’t support parents without jobs. Some also said the payments would worsen inflation by giving parents too much spending power.

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