Financial Assistance Programs & Grants for Black and African Americans

About Financial Help for Families

Government and academic research show that African Americans are much more susceptible to falling into the deep debt trap than the White population. The main causes: hefty credit card balances, student, auto, and home loans.

The same research shows that African Americans often seek a financial remedy — high-interest payday loans — that makes matters worse.

Despite increased access to education and other signs of upward mobility, the wealth and wage gaps Black and African Americans experience have not closed.

“The numbers are pretty clear and the problems are pretty pervasive, so there’s work to be done,’’ said Don Baylor Jr., a senior associate with the Annie E. Casey Foundation, a Baltimore-based philanthropic organization that addressed debt reduction for African Americans through grants in seven Southern communities. “We want to pull together a wide spectrum of stakeholders — business leaders, policymakers, and community organizations — that will get involved and take action.

“In the short term, we want to [allow more people] to be financially stable and move ahead. In the longer term, we are looking at policy reform, interventions that move the needle on decreasing the debt burden. We have to change those numbers.’’

Wealth Gap for African Americans

The average net worth of White households is 7.8 times higher than Black households – an average of $189,000 compared to $24,000, according to The Rockefeller Foundation. A 2017 study by the Economic Policy Institute – an independent think tank based in Washington – showed that the average wealth (savings, retirement, equity) for an African American family ($95,261) is one-seventh that of a White family ($678,737).

Usually, we pass on our wealth to our children. The disparity between Black and White creates a cycle making it harder for African Americans and other minorities to gain even ground with White Americans.

The U.S. Census Bureau said African American households in 2020 had a $45,870 annual median income, while White households were at $74,912.

According to the Bureau of Labor Statistics, the unemployment rate for African Americans was at 7.1% in December of 2021. The unemployment figure for Whites was 3.2%, closely mirroring a historical trend that generally has seen African Americans having an unemployment rate twice as high as Whites.

The Federal Reserve of Boston, in cooperation with Duke University and The New School, published a comprehensive analysis of the African American Wealth Gap. Review their findings here in The Color of Wealth.

How Income Levels Translate to Debt

The huge disparity in income and employment levels is the primary reason African American families struggle with debt.

In its 2018 financial capability report, the Financial Industry Regulatory Authority (FINRA) said 27% of African Americans were “underwater’’ in their mortgages (owing more on their mortgages than their homes were worth) compared to 7% of Whites.

Here are other categories of finance that show the economic divide between African Americans and Whites:

• 68% of African Americans engage in expensive credit-card behaviors (paying the minimum, paying late fees, paying over-the-limit fees) compared to 36% of Whites.
• African Americans were more likely to have a student loan than Whites (41% to 21%) and a higher incidence of having a late payment (59% to 35%).
• More African Americans (50%) than Whites (23%) are likely to utilize non-bank borrowing, such as payday loans.
• Only 43% of African Americans reported having good/very good credit, while the figure was 66% for Whites.

“There have been some structural economic changes like the expansion of all different forms of credit, more ways to get into debt,’’ Baylor said. “When you couple that with a wage disadvantage and a non-growth disadvantage in many other areas, it has just geared itself to higher debt levels for (African Americans).’’

African Americans and Student Loans

Baylor said he considers the African American student loan problem to be a unique and special worry.

“The reliance on student loan debt is most concerning to me,’’ he said. “Given the long-term nature of the debt, the fact that you’re not building equity as you pay it off and the ability to dismiss that debt in any type of settlement or bankruptcy is pretty much nil, I would put student loan debt in its own major category. It’s a perennial drag on the assets of many African Americans.’’

The problem was spotlighted in December of 2021 by the Education Data Initiative.

The highlights:

• African Americans Owe More: African Americans college graduates owe an average of $25,000 more than White graduates.
• No Progress at Paying Down the Loan: Four years after graduation, just less than the number of Black graduates owed more than they borrowed – which means Black borrowers are paying back on average 112.5% of the original loan. After the same time period, 83% of White students owe less than they borrowed.
• Larger Payments: Just less than 30% of Black borrowers make monthly payments of at least $350.
• Not Moving Forward: More than 50% of Black borrowers report that their net worth is less than they owe in debt. The ripple effect: 46% of Black student borrowers were delaying buying a home.

How Can African Americans Achieve a Greater Success Rate in Student Loan Debt?

Baylor said it begins with policymaking. More African American students need to be properly represented at institutions that have adequate resources to educate them. He said admission practices and funding systems should be studied and perhaps revised. That includes a hard look at federal financial aid because even African American students who earn degrees are clearly at financial risk.

On a larger scale, Baylor said, it would be a major achievement to have more African American students without large student loan debts to repay, allowing them to begin their careers with the ability to accumulate wealth and put them on equal footing with White peers who didn’t need to borrow or have a lower loan balance.

Grants and Scholarships for Black and African American Students

Numerous grants and scholarships are available for Black and African American students. The problem is narrowing it down. You want to find a scholarship catered to your talents and unique qualities. Here are some of the major nation-wide grants and scholarships for African American and minority students.

• United Negro College Fund: The nation’s largest (private) provider of minority scholarships. Awards over $10 million in scholarships for 10,000-plus African American students throughout the country.
• The Jackie Robinson Foundation Scholarship Program: This is a 4-year grant worth up to $30,000 for black students pursuing their undergraduate degrees.
• UNCF STEM Scholars Program: Provides $2,500-$5,000 per academic year for African American students interested in pursuing STEM careers and professions.
• Ron Brown Scholar Program: Provides $40,000 ($10,000 a year) for promising African American students to attend the four-year institution of their choosing.

Online databases like the ones found on Scholarship.com, collegeboard.com, and SallieMae.com are useful tools in narrowing down your search. Head to one of these sites and plug in your info. You will be greeted with dozens if not hundreds of potential scholarships and grants. The key here is to gloss over the ones that don’t apply to you and focus on the ones that align most with your profile.

African Americans and Payday Loans

In desperate situations, African Americans are more inclined to utilize payday loans, which are essentially advances on their paycheck. The average interest rate on a payday loan is 391% and can be higher than 600%. This is crippling the finances of anyone who chooses this method to help make ends meet.

How can this affect individuals and families?

A study by the Massachusetts Mutual Life Insurance Company concluded that 30% of African American workers have $500 or less in their emergency fund. Those same workers said an unexpected expense of $5,000 would cause “significant discomfort’’ and they probably wouldn’t be able to get by.

Let’s say one of those African American workers needs $325 to cover part of the rent and a utility bill, but payday isn’t for 10 more days. The worker can go to a payday advance store. By proving a paycheck is coming and signing a loan agreement, the worker can write a check for the advance plus a fee (let’s say $400 — the needed $325 plus a $75 fee).

The lender will pay $325 to the worker immediately, then hold that check until the next payday. But here’s the problem: If the borrower doesn’t have enough money in the bank to cover the payday loan, the penalty is crippling.

Lenders can roll the principal over into a new payday loan and a vicious cycle ensues. There are no installments with payday loans, so the debt is rolled over into a new loan with new fees. On average, the worker would end up paying $793 for that $325 loan (assuming the introductory fee and the loan being flipped to a new one approximately nine times).

Payday lenders insist they offer valuable services, such as an alternative to bank overdraft fees, returned check charges, and late fees. But Baylor and others view the businesses as predatory operations that target the poor and selected ethnic groups, such as African Americans.

How Can African Americans Escape Payday Loans?

“It’s about regulation and having a reasonable ability to repay,’’ Baylor said. “It’s about stimulating other low-cost financial products that meet people’s needs. And you need to have these products accessible to people, but not have them at 400 to 500 percent repayment.

“If you look at the South overall, where many payday locations originated, places like Alabama, Mississippi, and South Carolina, a lot of those areas are heavily African American. Now some of them connect with White rural communities as well. Even though there’s not consistent data, you can look at where these stores are located to paint a picture of the situation. They seem to be a constant in African American communities. It’s not good. It’s a problem.’’

One new wrinkle has cropped up for some technology-savvy companies. There’s now an Instant Financial app, which offers workers an on-demand system that gives them access to their money the day after they earn it. With a few swipes on their phone, workers can deposit their earnings and use the money to pay bills.

Here’s how it works: Each morning, employees get a notification of how much they earned the previous day. They can deposit half of the money on a debit card (usually with a $3 fee per transaction).

The new technology might imperil payday lenders, which have about 12-million American customers each year. But it’s also a challenge for everyone’s financial discipline. The traditional weekly or bi-weekly payroll system lends itself to budgeting and regular deposits into savings or retirement accounts.

Regardless of the system used, it doesn’t take away the importance of creating an emergency fund (typically about six months of earnings) or considering a debt management program through a nonprofit credit-counseling service.

Discriminatory Lending

Lending discrimination is when a lender refuses a loan to a consumer because of their race, ethnicity, gender, religion or disability. It occurs when a lender decides it will not finance you even though you meet all the qualifications for funding. If you have a spotless credit report and high credit score along with a high, stable income, yet struggle to lock in a loan, you may be a victim of lending discrimination.

That’s not to say there aren’t victims of lending discrimination with low credit scores or salaries. Indeed, making less money and having a shoddier credit report can make it easier for lenders to discriminate against you, since they can cite one of these metrics as not meeting their loan requirements, rather than admitting to unabashed discrimination.

The first step to combating lending discrimination is knowing your rights. The Fair Housing Credit Act (FHCA) and the Equal Credit Opportunity Act (ECOA) are meant to protect consumers from discriminatory lending. The Home Mortgage Disclosure Act (HMDA) forces banks to disclose detailed info on their mortgage lending. It acts as an oversight on banks and lenders to make sure they’re upholding fair lending practices.

The Fair Housing Act (FHA) prohibits discrimination based on:

• Race or color
• National origin
• Religion
• Sex
• Familial status
• Handicap

The Equal Credit Opportunity Act (ECOA) prohibits discrimination based on:

• Race or color
• National origin
• Religion
• Sex
• Marital status
• Age
• Applicant’s receipt of income from a public assistance program
• Applicant’s exercise, in good faith, of any right under the Consumer Credit Protection Act

Under the ECOA, creditors can ask for most of this information, but they cannot use it to deny you funding. Also, they may never ask for your religion.

Further, lenders cannot deny you a mortgage because you receive income from an outside source. For instance, public assistance, social security, pensions, and child support payments must be considered the same as income from a full-time job. As long as this income is reliable (consistent) you should be able to move forward with your loan.

The Office of the Comptroller of the Currency (OCC) lists these as common predatory lending practices to look out for.

• Inadequate disclosure: This is when a lender doesn’t inform you of the true cost of a loan. It will go out of its way not to mention all the true rates (and risks) associated with the loan.
• Risky loan terms and structures: This is when the lender designs a loan that makes it hard or impossible for borrowers to pay off. The loan is written in a way meant to confuse and ensnare the borrower.
• Padding or packing: Charging borrowers hidden or unwarranted fees.
• Flipping: Encouraging customers to refinance loans solely to earn loan-related fees. This is similar to what payday lenders practice on borrowers when their paychecks fall short.

If you think you’ve been the victim of lending discrimination, tell the lender directly. This can be intimidating, but the law is on your side. If you can show you know your rights and that you’re not willing to walk away empty-handed they may be more willing to work with you.

You may be unwilling (understandably) to work with discriminatory lenders. If this is the case, go over your state’s equal credit opportunity laws to see what statutes the lender may have violated.

You can sue discriminatory lenders in federal court where, if you win, you can recover damages and/or be awarded punitive damages. You can also search for other victims of lending discrimination from that lender and join them in a class-action lawsuit.

You may not have the time, energy, or will for a court battle. Still, you should file a complaint with the appropriate authorities if you feel you’ve been a target of lending discrimination.

File a complaint regarding a violation of the ECOA with the Consumer Financial Protection Bureau (CFPB). Regarding the FHA, file a complaint with the U.S. Department of Housing and Urban Development (HUD).

If you’re not sure what agency to call, ask your lender. If it denied your mortgage application, it’s under a legal obligation to give you the name and address of the appropriate government agency to contact, according to the Federal Trade Commission (FTC).

Financial Resources for African Americans

The NAACP has long championed financial services for African Americans. Its economic department addresses poverty, lack of jobs, disproportionately high unemployment, lack of affordable housing, and other economic issues.

It has programs in place for economic education, individual and community asset-building, diversity and inclusion in business hiring, career advancement and procurement, and the monitoring of financial banking practices. For more information, visit www.naacp.org.

The federal government also offers various grants and financial assistance programs.

Among them:

• Student Loan Debt: There are income based repayment plans that reduce the monthly payments or shorten the repayment period so borrowers will top out at 10% of their discretionary income. African American students (and others) who enter public service after graduation will have their student loan debt forgiven after 10 years if they make on-time payments.
• Unemployment Aid: With the African American unemployment rate higher than the national average, help is offered in the form of cash grants, emergency assistance, COBRA tax credits, and unemployment insurance benefits.
• Housing Assistance: The Department of Housing and Urban Development (HUD) supports foreclosure prevention and homeownership through its Housing Counseling program. HUD also addresses mortgage fraud and reinvests in neighborhoods.
• Child Care: The Child and Dependent Care Tax Credit is available to middle-class African American families. Almost all families making less than $115,000 a year would see a larger credit on their tax returns.
• Rental Assistance: The Project-Based Rental Assistance program helps African Americans (and all people) find new places to live, allowing low and moderate income households to find or keep safe and sanitary housing. It can also stop an eviction, help with energy bills, and find places to live for the homeless.
• Single Mothers: The Community Action Agency offers financial help for single mothers through cash assistance to help pay utilities, rent, food, and childcare. Call (202) 265-7546 to learn more.
• Food and Nutrition: The federal government provides billions of dollars in nutritional aid programs as well as help with food assistance for lower income individuals and families. The WIC program – special federal help for women, infants and children — supports more 10 million low and moderate income participants. The list of free government and private food assistance programs is lengthy.
• Small Businesses and Entrepreneurs: Loans for Black owned businesses and entrepreneurs are available. Grants from states, private sources, non-profits and corporations are designed to aid Black businesses. The availability of funds varies depending on what programs are active, but there are several options to find business grants for Black owned companies.
• Section 8 Housing Choice Voucher Program (Housing Assistance): Money to help the poorest among us pay their rent is available for income subsidized homes or apartments. The funds provide rental assistance, the idea being it allows the poor to live in better housing and in neighborhoods they prefer. Minority communities hit hard by COVID, deceptive lending and housing practices and by the job market’s ups and down should benefit from these HUD housing programs.

Getting Out of Debt

Whether it’s credit card debt or student-loan debt, there are general principles that apply to everyone seeking a clean slate. Here are a few tips that can be particularly useful for African Americans looking to propel themselves out of debt.

• Pay with Cash: It’s one way to have a handle on how much money you have — and where it’s all going. By paying cash and using online tools such as MoneyMinder, you will quickly learn about your financial values and whether adjustments are needed.
• Buy Only What You Need: Try to avoid emotional spending. Think about what you need — and don’t go looking for anything else. Before making a big purchase, sleep on it, or give it some thought over a weekend.
• Eat at Home: It’s the easiest way to save money. Really. Think of it this way. If you’re spending $100 a week on eating out, that’s $5,200 a year. If you save that amount at 5% interest over 10 years, you’ll have $68,000. OK, if you must eat out, at least limit things. Make it a random weeknight. Or make some of your favorite meals at home but try to save on the groceries.
• Pay Your Bills on Time: This is a no-brainer. It’s senseless to be victimized by late fees and other miscellaneous costs. Late fees and interest fees add to the amount owed, and makes it more difficult to keep finances in order. The average late fee on credit card is $36. The first time, the late fee can be up to $28. If you miss two or more payments, the fee could be as much as $39. Adding those charges on to the amount due every month increases the debt burden and decreases the ability to keep the financial house in order.
• Don’t Spend without a Budget: Create a budget and stick to it. Review every bill. Streamline your cable. Cut the fat (such as miscellaneous fees, high-interest rates, and recurring automatic payments for goods and services that you don’t even use). Spend less, so you can save more to the emergency fund.
• Create More Income: Find a side hustle. Take a part-time job tending bar, delivering pizzas, or using your work skills for a freelance opportunity. Sell your extra stuff on eBay. Invest your spare change on acorn.com. It’s all about consuming less and owning more.
• Refinance Your Mortgage: If your home is underwater — you owe more than the home is worth — or if mortgage rates are especially low, this is a great option. Do your research, find a trustworthy lender, and go from there.
• Renegotiate Your Credit Card Bills: You’d be surprised at the flexibility of some credit card companies. They will negotiate terms. They are often motivated by getting something, not being left holding the bag. By renegotiating your Annual Percentage Rate (APR), your monthly payment will be more affordable.
• Avoid Predatory Lending: Predatory lenders will reel you in and leech you dry. They may seem like a good idea for getting over a rough patch, in reality, they will trap you in a cycle that keeps you dependent on their high-interest advances. In place of payday loans, try negotiating a payment plan with your creditor, utility company, or landlord. Whatever interest they charge will be much lower than anything you’ll find with a payday lender.
• Find a Side Hustle: In the internet and virtual world, opportunities are there to make money outside of the traditional job market. Jobs are as varied as delivering groceries or meals from restaurants, using your car as a “taxi” service via Uber or Lyft, transcribing, tutoring, selling your old household items on eBay or taking care of others’ dogs or cats are just some of the ways you can turn a side hustle into money in your pocket.

Seek Professional Debt Help Solutions

• Credit Counseling: Working with a nonprofit credit counseling agency provides a clear picture of your financial options. The counselors can review your budget and evaluate all of your debt-relief alternatives. Many free services are offered by nonprofit organizations.
• Debt Management: It provides reduced interest rates, and possible relief from late fees, or penalties from creditors. Under the debt management plan, you pay back the full principal over a 3-5 year time frame. The debts from credit-card bills, medical bills,  department store cards, and other lines of unsecured credit can be efficiently managed.
• Debt Consolidation: You are reducing interest rates and combining all your debts into one manageable monthly payment. Under debt consolidation, you take out a loan, which is used to consolidate and pay off all your other debts.
• Debt Settlement: You can negotiate a lump-sum settlement payment with creditors. It allows you to pay less than  you owe, while eventually retiring the debt. Debt settlement damages your credit score and is generally a consideration for people with very poor credit.
• Bankruptcy: In dire circumstances, bankruptcy can give you a fresh start from your debt burdens. You can file for either a Chapter 7 bankruptcy, which cancels your debts or a Chapter 13 bankruptcy, which sets up a 3-5 year repayment plan.