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People on Disability Use Payday Loans

Taking out a high-cost payday loan is an act of desperation, and people on federal disability are some of the biggest users.

Nearly 6 percent of households under 66 and on disability use payday loans, compared with 4 percent of the general population, according to Haydar Kurban at Howard University, who did the analysis for the Retirement and Disability Research Consortium.

The financial vulnerability of disability recipients was starkest in the months after the 2008-2009 recession, when their use of payday loans spiked to 22 percent. The rate of borrowing also rose at the time for the general population but by much less.

Disability benefits under the federal Supplemental Security Income (SSI) program average about $900 a month. To eke out a living, people on disability try to supplement their income with food stamps, Medicaid, some work, or housing assistance from the government or a family member – and some use payday loans to raise quick cash. (A small share of people in this study are not disabled but receive SSI to supplement their Social Security benefits.)

Despite the very low incomes of the disability beneficiaries, they are attractive customers for payday lenders, Kurban said, because the benefit checks provide extra assurance the loans will be repaid. …

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