How to tackle personal finance issues as an undocumented immigrant
Fifteen years ago, Mayra Aldas-Deckert emigrated from Ecuador at age 21 and joined the roughly 11 million undocumented immigrants now living in the U.S. She found everyday tasks like opening a bank account and paying taxes difficult. Same with finishing her degree at Brooklyn College, where she was charged out-of-state tuition and didn’t qualify for any financial aid.
Three years ago, Aldas-Deckert became a U.S. citizen. Today she is the manager of community engagement at the New York Immigration Coalition, a nonprofit that represents more than 200 immigrant and refugee rights groups throughout New York. Her mission: Help others like her to find their legal and financial footing.
For a long time, she said, “there wasn’t enough work being done around the financial state of immigrants. But now there is more traction in financial education.” And the need is great. Numerous resources that citizens rely on simply aren’t available to undocumented immigrants. Ordinary financial transactions may require papers they don’t have. In addition, immigrants are especially vulnerable to scammers, because of language barriers, their tendency to carry cash, and their dependence on middlemen like check cashers rather than banks.
Here’s how they can access financial resources and benefits that will help their families succeed.
Get health care
Health coverage is a personal finance essential, but nearly 4 in 10 undocumented immigrants lack it. Although they’re not eligible to enroll in Medicaid or the Children’s Health Insurance Program (CHIP), or to purchase coverage through the Affordable Care Act marketplaces, they do have other options.
Undocumented college students may be able to purchase a plan through their school. Some undocumented workers receive health insurance through an employer plan, as employers often do not ask for proof of immigration status when workers sign up. Some buy insurance through private companies that don’t ask for immigration documentation, though this can be expensive. For minors, California, Illinois, Massachusetts, New York, Washington state, and the District of Columbia offer health insurance to undocumented children under age 18.
Other possibilities include community health centers in all 50 states that provide services on a sliding scale to undocumented immigrants and others, regardless of their ability to pay. A few cities, such as Los Angeles and San Francisco, offer free or low-cost health care to undocumented immigrants through government-funded programs. For those who require urgent medical care, hospital emergency rooms nationwide are required to treat patients no matter their immigration status.
This patchwork of coverage possibilities can be confusing to navigate, and often websites do not have information available in an immigrant’s native language, Aldas-Deckert said. She recommends contacting a nonprofit like hers for advice. Check nationwide databases such as Informed Immigrant for a list of immigrant service centers in a given area.
About 65,000 undocumented students graduate from high schools in the U.S. every year. Federal law guarantees children a public-school education through grade 12 regardless of immigration status, but many undocumented families assume that their kids can’t go on to attend college. That’s not true. No federal law prohibits it, though some state-funded schools do require proof of citizenship to be admitted. The real challenge is affording higher ed, as Aldas-Deckert can attest. “I paid all of the fees you can possibly imagine, because I was undocumented and I wanted to go back to school,” she said.
Paying for school is a different experience for undocumented students. First and foremost, they aren’t eligible for federal financial aid in the form of grants and loans. Many states also withhold aid, though some offer it to certain undocumented students who qualify. Another hurdle is that colleges in many states charge the higher tuition rate for out-of-state residents, even if an undocumented student has lived in the state for a long time. For more information on which states offer financial aid and in-state tuition to undocumented students, consult the National Immigration Law Center (NILC).
Here’s some good news: Some private colleges do offer undocumented students financial aid. And there are scholarships for qualifying students who aren’t citizens. Good places to look for lists of these resources include the Mexican American Legal Defense and Educational Fund, the NILC, and the embassy of a student’s country of origin.
It’s important to pay all U.S. federal and state taxes, even for the undocumented. It’s the law, it’s the way to get back a tax refund and various tax credits, and it shows “good moral character” if an immigrant applies for citizenship in the future. In fact, research shows that at least half of undocumented immigrants file income tax returns.
While American citizens use a Social Security number (SSN) to file a return, undocumented immigrants must use an Individual Taxpayer Identification Number (ITIN) instead. This can be obtained from the Internal Revenue Service (IRS), by filling out a form called a W-7, which requires proof of identity and foreign national status using a passport or a combination of other documents. Unlike an SSN, an ITIN can expire, so it must be renewed periodically. The number may also come in handy when opening a bank account or obtaining a mortgage.
It’s important to know that legislation prevents the IRS from sharing taxpayer info, including with immigration authorities. “At the federal level, the IRS is pretty rock solid about keeping data private,” said Elaine Maag, a senior research associate in the Urban-Brookings Tax Policy Center at the Urban Institute. While these same federal protections do not apply at the state level, Maag said, undocumented immigrants should feel “comfortable” filing, especially because simply filing with an ITIN should not flag a return as belonging to someone who’s in the country illegally. Many filers, including foreign students and people who don’t live in the country but have U.S. investments, use ITINs.
To decide whether a person can rent an apartment, buy a car, or take out a formal loan, landlords and banks look at an applicant’s credit score, a number that shows how well he or she has managed debt in the past. The companies that come up with these scores are called credit bureaus. Many undocumented immigrants lack or have very low credit scores, and often turn to payday lenders that charge ridiculously high interest.
One way to build credit is to get a secured credit card from a bank or credit union. Here’s how it works: You deposit a certain amount of money—say, $500—in a bank, and then you’re allowed to charge up to that same amount on the card. If you make responsible payments for several months, the bank will let you have your $500 back, but you can continue to use the card and make payments. In the meantime, the bank lets the credit bureaus know that you’re a good borrower, and your credit score goes up.
Some banks require a Social Security number to open any sort of account with them, but others will accept an ITIN. Generally, applicants also need to provide some form of identification—a driver’s license, passport, or other official ID. Credit unions are often more flexible than banks about their requirements for opening an account, Aldas-Deckert said. It’s a good idea for prospective applicants to call ahead to the bank or get advice from an immigrant advocacy center so they’ll know where they can successfully apply for a secured card.
Another option for building a credit score is to join a lending circle. Traditionally, lending circles were an informal way for people to help each other save money, but recently, an innovative organization called the Mission Asset Fund—whose founder was undocumented throughout his childhood before becoming a U.S. citizen—has started using them to help people build credit scores.
Members of a lending circle chip a fixed amount into a common pool each month, and take turns receiving the proceeds. They owe no interest on this “loan” when it’s their turn to get the money in the pot. Members’ regular monthly payments are reported to the credit bureaus, which helps them build an official record of debt repayment. The Mission Asset Fund mostly operates in California, but it has a presence in many other states through partner organizations. Check Lendingcircles.org to see if there’s one in your area.
Save for retirement
Though many undocumented immigrants pay into Social Security through paycheck deductions, they are not eligible to receive benefits from this federal program when they retire—unless they become permanent residents (with some restrictions) or citizens. That’s why saving for retirement is that much more important. An IRA or a 401(k) retirement plan may be an option for some undocumented workers, if they can find an employer or brokerage firm that doesn’t require an SSN—although many do. Socking away money in a savings account is better than not having any nest egg at all, yet many undocumented immigrants fear putting a sizable amount of money in a financial institution, believing they could lose it all if they’re deported. This isn’t the case.
Investing in the market is a less familiar concept in many immigrants’ home countries than it is in the U.S. In some cultures, retirement itself is a foreign concept, Aldas Deckert said. The sad truth is that many undocumented immigrants spend their old age in poverty. Aldas-Deckert’s parents are in their early 60s and have saved nothing for retirement. For years, they were undocumented, and even now, saving is difficult. As an undocumented immigrant, she said, “you do want to put money away for your retirement, but you don’t really have the luxury of putting it away when you need money to buy food or pay for things.” For those who can, the best retirement strategy may be to try to naturalize, and thereby qualify to draw Social Security.
Finding one’s financial footing as an undocumented immigrant is challenging. But there are options out there, and many organizations that are ready and willing to help people make the most of them.
That said, it’s a good idea for anyone who is not a U.S. citizen to get legal advice before they or anyone else in their immediate family—even those who are documented or have attained citizenship—apply for any government program, said Ann Kanter, managing partner at Kanter & Romo Immigration Law Office in Sacramento. That’s because new rules proposed by the Trump administration could mean that any public assistance to an immigrant family could negatively affect an application for citizenship by one of its members. Undocumented immigrants can generally get free legal advice through local immigration coalitions. Check with the NILC for a list. Law school immigration clinics are also a good source for legal advice and referrals.