A DACA Recipient’s Guide to Overcoming Financial Barriers

If you’re a Deferred Action for Childhood Arrivals (DACA) recipient, also known as a DREAMer, you might face some unique financial barriers. Getting approved for a personal loan, buying a home, or paying for college can be trickier when banks and lenders don’t classify you as a permanent resident. But DREAMers still have plenty of options if you know where to look and what to ask. Here are the six most common financial issues DREAMers are likely to face, along with tips and resources that can help.

Paying for College
Applying for Scholarships
Paying Renewal, Application and Legal Fees
Paying for a Financial Emergency
Buying a Home
Building Credit

Paying for College

Unfortunately, DREAMers aren’t eligible for most federal or state financial aid for college, so you won’t be able to file a Free Application for Federal Student Aid (FAFSA) for grants, scholarships, or loans. However, DREAMers can apply for financial aid from private sources, including private loans, and a few states do provide financial aid and/or in-state tuition rates to undocumented residents.

The following states offer in-state tuition rates to undocumented students:

Of these states, New York, Connecticut, and New Jersey allow eligible undocumented students to access state financial aid. Oklahoma and Rhode Island allow in-state tuition rates to undocumented students through Board of Regents decisions, according to the National Conference of State Legislatures. Check out the institution you’d like to attend for more information about in-state tuition rates.

You can apply for a private student loan from a lender like Stilt, Discover, or Citizens Bank in lieu of federal student loans. Most require a cosigner who has a Social Security number. Check the interest rate, repayment terms, and all of the requirements in detail before you sign a contract for a private student loan.

You can also look into a more general personal loan from a bank, credit union, or online lender. An “unsecured” personal loan lets you pay in installments over time without collateral to back your loan. In other words, the bank can’t seize your home or car if you don’t pay a personal loan back.

Unlike other types of loans (such as student loans or auto loans), you can use a personal loan for almost anything you want, including school. Some common service charges you might see include origination fees, underwriting fees, credit check fees, and repayment fees. Choose a lender that offers low or no fees and limited charges.

Applying for Scholarships

A scholarship is like a loan for college you never have to pay back. “Many individuals believe DACA is an obstacle to receiving aid directly from the school, which is incorrect,” says Renata Castro, an immigration attorney in Pompano Beach, Florida. “Institutions are free to award scholarships as long as permanent immigrant status is not a requirement to obtaining the funds.”

Here are a few scholarship options for DREAMers:

Before you attempt to secure one of these scholarships, make sure the application is completed properly, and do your best to make it stand out from the crowd. Here are a few tips to help you with the process:

  • Complete all required sections of the application. Don’t leave out any information, and if you’re not sure whether a particular section applies to you, review the instructions or contact an appropriate representative for clarification.
  • Check your entries for spelling, grammar, and punctuation. Have another person proofread your application for errors or oversights.
  • Attach all necessary paperwork. Understand all the requirements for the supporting documentation needed to process the application. Getting it right the first time will prevent unnecessary back-and-forth communication with the sponsoring institution.  
  • If an essay is required, make it personal. Rather than a canned response, reviewers will relate more to a story about one of your achievements or how you overcame an obstacle.
  • Pay attention to deadlines. Submitting the application in a timely manner is crucial, and in some cases, scholarships may be distributed on a first-come, first-served basis, s, sending the application in early may help your chances.

Paying Renewal, Application and Legal Fees

DACA is no longer accepting new applicants, but if you’ve had DACA at some point in the past, you can submit a renewal application, according to the National Immigration Law Center. “DACA is currently in limbo and what DACA holders should really be doing is seeking legal advice on whether they may be able to pursue alternative relief,” says Castro. “For example, individuals who obtained DACA prior to 18 years old have not accumulated unlawful presence, and as such, may be able to obtain a green card through an employment-based green card application. Seeking competent legal advice is essential to navigating the uncertain waters of immigration law at this time.”

Castro says current DACA holders should save at least $1,000 for legal fees and immigration fees for every renewal period. Fees exclusively for DACA renewal are $495 and can be made online using a credit or debit card, sent through the mail via a credit card number, or check. You can also make a payment in person at a USCIS field office.

In certain situations, you may be exempt from having to pay the renewal fee. If you have to pay the $495 fee but can’t afford it out-of-pocket, you can apply for the following:

Buying a Home

If you’re no longer a student, your next big financial goal might be buying a home. “Many of the normal avenues are closed to the DACA client,” says Mike Scott, senior mortgage loan originator for Independent Bank. “They cannot qualify for any loan in which the government is the backer. As a result, FHA loans, VA loans and USDA loans are automatically out. Fannie Mae, however, did recognize that the DACA recipient, for all intents and purposes, has a work permit, and allows the clients to qualify for any Fannie Mae product.”

Fannie Mae, or the Federal National Mortgage Association, is a leader in providing housing finance for homebuyers and renters in the United States. The Fannie Mae HomeReady loan, which allows for as little as 3% down, is ideal for DACA recipients. DREAMers must have:

  • Low income
  • Be first-time or repeat homebuyers
  • Limited cash down payment
  • A credit score greater than 620

“Now, keep in mind that just because Fannie Mae accepts the loan to a DACA recipient, not every lender out there will follow up with a loan to a DACA client,” says Scott. “Our current political uncertainty has caused many of the larger banks to turn the client away because of the government’s stance as to the legal residency status of the DACA client.”

Scott recommends looking into several lenders before deciding on the right one — and that includes confirming ahead of time whether a particular banking institution will allow you to pursue a loan. “In the case of larger institutions, they may find that they won’t even open any accounts for the DACA recipient, not even a checking/savings account.

DACA recipients should find out if their financial institution will issue a mortgage loan to a DACA recipient. If the answer is ‘no,’ then why do they have their checking and savings accounts with that institution? They should take their money to one that accepts them.”

Paying for a Financial Emergency

As a DREAMer, it may be difficult for you to get cash in an emergency. There are a few options you should consider, but some methods of raising cash may be better than others. Here’s a look at the advantages and disadvantages of dealing with an urgent need for liquid funds.

Payday Loans

Pros:

  • Payday loans are a quick, easy way to get cash for an unexpected expense.
  • Your next paycheck acts as collateral for the money you request.   
  • Typically, a source of income, a bank account, and a valid form of identification is all you need to secure the funds.

Cons:

  • Payday loans usually accumulate interest at an extremely high rate (up to 780% per year).
  • Hidden fees added to the accumulated interest will also increase the cost of the loan.
  • Impairing you future cash flow for an immediate need can limit your ability to pay living expenses such as food, rent, and utilities.

Credit Cards

Pros:

  • Credit card cash advances can be obtained for more reasonable interest rates than payday loans.
  • You can stretch payments out over a longer term, making payments more affordable.
  • Opening a credit card account can help establish a credit history for future borrowing needs.  

Cons: 

  • Not all credit card companies will accept your DACA Social Security number on an application.    
  • If you don’t have an established credit history, some companies will only offer secured options, which may not be feasible if you need immediate cash in the first place.
  • Utilizing credit cards to their maximum limits can lead to longer-term debt problems.

 Personal Loans

Pros:

  • Terms on personal loans can range up to 60 months, which allows lower monthly payments.
  • You may be able to pledge an automobile or other assets as collateral for a secured loan, which improves the odds of receiving the funding.
  •  Lenders like to see a mix of credit types on your credit report, so combining personal loans with reasonable credit card offers will help your credit score in the long run.

Cons: 

  • It may be difficult to find a lender that will offer a personal loan without an established credit rating.
  • If you do use collateral to secure a loan, failing to meet the conditions of the agreement may cause you to forfeit the asset.
  • Unscrupulous lenders may bury unreasonable penalties — like exorbitant late fees — in the fine print.

Building Credit

Your credit score can help you get the loans (and the better interest rates) you want in the future. Your credit score is a three-digit number that ranges from 300 to 850 and indicates to a lender how likely you are to make payments in full and on time. According to FICO, the average credit score is 704.In order to build a solid credit score, follow these tips:

  • Open a credit card with a manageable dollar limit. Accepting and reaching a limit that produces payments you can’t afford could lead to late payments or default, both of which will damage your credit. Instead, start with a small maximum limit and pay off small purchases immediately.
  • Keep credit-card utilization to a low percentage of the maximum limit. Keeping balances at 30% or less of your maximum will help make payments more affordable, improve your credit score, and lower your debt-to-income ratio.
  • Each month, pay all your bills on time. Neglecting to pay utility or medical bills by their due dates can have a negative impact on your credit — especially if unpaid balances end up with a collection agency.
  • Keep your borrowing activity in check. Applying for multiple credit card accounts, personal loans, and auto financing options will populate your credit report with hard inquiries. Too many of these marks reported to credit bureaus will also lower your credit score.

Organizations That Can Help

  • Hispanic Federation (New York): The Hispanic Federation supports Hispanic families and strengthens Latino institutions through education, health, immigration, civic engagement, economic empowerment and the environment.
  • Immigrants Rising (California): Helps young people get the education and career they want through personal, institutional and policy transformation.
  • National Immigration Law Center: The National Immigration Law Center (NILC) defends and advances the rights of immigrants with low income.
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