Understanding Consumer Borrowing Among Women Who Receive Social Assistance

The U.S. credit market is awash in credit products for all economic strata of society, and many new credit products are marketed directly toward credit-constrained people:  high-interest credit cards, payday loans, title loans, personal loans from "loan companies", and pawn shop loans.  Not surprisingly, 62% of low-income families have a credit card, and 32% of people who qualify for the Supplemental Nutrition Program (SNAP) have consumer debt.  At the same time, approximately 34% of Americans receive some form of means-tested social assistance.  The purpose of this study is to examine how and to what extent welfare recipients utilize these prolific consumer borrowing opportunities. While previous research has identified the various and creative ways that women on welfare make ends meet (Edin & Lein, 1996), it was conducted before credit market liberalization of the 2000s that saw a surge in both mainstream and fringe financial lending.   

There are two main objectives of this study:  first, to understand the sources, contours, and processes that women who receive means-tested welfare identify in their descriptions of borrowing. Second, to generate a theory that explains how these women use/do not use credit to make ends meet. The main research question is, "What are the borrowing attitudes and behavior of women who receive public means-tested social assistance?" 

This study employs a grounded theory design using semi-structured interviews with women over the age of 18 who currently receive means-tested social assistance and use some sort of borrowing, including but not limited to:  payday loans, pawn shop loans, revolving credit cards, title loans, personal loans from loan companies, and other informal loans.  Because borrowing is a social process, it is examined using Grounded Theory methods using Charmez' constructivist grounded theory approach, including systematic coding, memo writing, and theory development. Three research assistants and one faculty researcher comprise the team that conceptualized the study, created and refined interview questions, recruited informants, conducted participant and non-participant observations, conducted interviews, and analyzed data. Informants were recruited through professional networks as well as posting flyers throughout the community.  Snowball sampling was utilized, as well as theoretical sampling.  The total sample (n = 23) is 52% Black, 44% White, and 4% Asian/Pacific Islander. 

A theoretical framework has been developed through grounded theory analysis of data that serves to explain how and why women who receive social assistance borrow.  This framework contains three main and interconnected concepts:  1) Complicated methods of borrowing affects and is affected by complex life circumstances, 2) Access to credit provides hope, but also increases economic vulnerability and self-doubt, and 3) Balance between personal responsibility and social pressures. 

Women who receive means-tested social assistance intersect with various fields of social work.  Social work practitioners' understanding of their borrowing practices, reasons, attitudes and feelings can inform practice across the micro-macro continuum, specifically in the emerging field of Financial Capabilities and Asset Building (FCAB).