Monthly cash payments from the federal government over the past year may have helped some parents avoid taking out payday loans or selling their blood plasma to pay bills.
Parents who had previously used such “alternative financial services” were less likely to do so again after taking child tax credit checks. according to a new report Published as part of the Brookings Institution’s Global Economy and Development program by researchers at the Social Policy Institute at Washington University in St. Louis and Appalachian State University.
Researchers found that 5.3% of CTC-eligible parents took out loans from payday lenders before payments began in July but did not do so again, while only 3.3% of households in a control group similarly stopped. borrowing from payday lenders.
With 36 million households receiving the monthly child tax credit benefit, that means nearly 2 million households may have given up payday loans, which carry high interest rates and can roll over to another loan in some states if the borrower doesn’t pay.
“We’ve seen a significant decrease in families taking risky and harmful measures to tighten their budgets, like payday or pawn loans, selling 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 not only help families with their long-term financial health, but also with their personal health.”
Congressional Democrats created the child tax credit to reduce child poverty and material hardship for parents. For the six months that the benefit existed, American parents enjoyed the kind of child support that other advanced countries have offered for decades.
However, the economic impact of the payments has received relatively little attention in Washington amid concerns about rising inflation, which affects a much broader population than just parents of teenage children.
The researchers interviewed a sample of eligible parents and a control group in July, when payments began, and conducted a follow-up survey of recipients and non-recipients in December and January, after payments stopped.
The monthly upfront payments for the child tax credit, worth up to $300 per child, may have prompted parents to reconsider pawn shops and plasma donations. Recipients of child tax credits who had sold blood plasma before payments began were twice as likely as non-recipients to say they had stopped selling plasma in the follow-up survey (4.8% vs. 2.6%).
However, parents who had not taken out a payday loan or sold plasma in the six months before the payments began used the Quick Cash programs just as often as the control group, despite receiving child allowance payments.
The research also suggested that the CTC offered parents more money for rainy days, healthier meals, and a reduced risk of eviction. It adds to a growing body of evidence suggesting the monthly payments, paid out from July to December last year, made life easier for tens of millions of parents.
The Columbia Center on Poverty and Social Policy, for example, estimated that the payments reduced child poverty by almost 30% and that the decline reversed once the payments stopped in January.
Democrats had intended to make the expanded child tax credit an integral part of the welfare state, one on which parents would rely the way seniors rely on Social Security pension benefits. But their plans to entrench the policy fell through when they failed to muster even 50 Senate votes on a bill last year to continue payments as part of a broader package.
Republicans generally opposed the payments, deriding the money as “welfare” and saying the government shouldn’t support unemployed parents. Some also said the payments would exacerbate inflation by giving parents too much spending power.