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Financing Assistive Technology through Loan Programs
Financing assistive technology (AT) remains a persistent barrier for people with disabilities seeking to obtain AT. One emerging funding source is the statewide AT financial loan program, currently offered in six states. People with disabilities can borrow needed funds to purchase assistive devices and services through these programs.
For example, thirteen-year old Jessica Boyce's mom received a loan from Virginiaís Assistive Technology Loan Fund Authority (ATLFA) to purchase a lift-equipped van to transport her daughter. Jessica has cerebral palsy and uses an electric wheelchair for mobility. "We live in a rural area with no public transportation. Jessica had been unable to go anywhere except school because we didn't have the type of transportation that will take her where she wanted to go," said Ginger Boyce, her mother. Ginger learned about the AT Loan Fund through an article in her local newspaper. She realized the van was actually within reach, as the loan criteria accommodated her limited income and savings. She was able to obtain a low-interest loan through ATLFA to purchase a converted van. Now Ginger is able to transport Jessica without any difficulty. More importantly, they can go to medical appointments, shop, visit friends, and attend community events.
New Alternative Financing Loan Program
The Virginia ATLFA is one of six state programs that received funding this past year to establish a new or expand an existing AT loan program. In October 2000, $3.8 million was made available to six states to fund assistive technology Alternative Financing Programs (AFP), authorized under Title III of the Assistive Technology Act of 1998 (P.L. 105-394) (AT Act), and administered by the National Institute on Disability and Rehabilitation Research. These AFPs allow individuals with disabilities and their family members to purchase AT devices and services. The six states are Kansas, Maryland, Missouri, Pennsylvania, Utah, and Virginia.
Private and/or public funds were matched with federal funds dollar for dollar. By combining these funding sources, each of these states has at least $1 million to support loan financing for people with disabilities. As a condition for the matching federal monies, each state partners with a community-based organization, such as Centers for Independent Living or state Assistive Technology Projects, that has individuals with disabilities involved in decision making at all organizational levels, to administer the alternative-financing program. These community-based organizations are then required to enter into a contract with a commercial lending institution or state-financing agency. (See Table 1. AFP Programs At-A-Glance.)
Typically, the loans that are offered by these programs have lower interest rates and offer longer terms than are commercially available through traditional bank loans. These terms make them particularly attractive to low- and moderate-income borrowers, categories within which the majority of people with disabilities find themselves. Affordable loan terms are built into the state program through the type of loan model that is negotiated between the community based organization and the financial lending partner. Most of the programs provide some kind of loan guarantee or interest buy down feature. They use the federal matching funds to guarantee a loan; that is, the AFP accepts the liability if the loan is not paid and sets aside funds for that purpose. A program may also buy down an interest rate; that is, the program provides funds up front to reduce the interest charged usually by 4-5 percentage points. Thus, a regular 9% loan may be available through the AFP for 4% with a 5% buy down in place.
Since the AFP programs are relatively new, little data are available as of yet to the full extent of loan activity and the comprehensive impact the programs are having in the states. However the programs do attract many borrowers. In the first six months of operation the newly funded AFPS received over 75 applications for loans. Loans range from $250 to $50,000, with the average loan between $5,000 and $7,500. The most frequently purchased AT through the loan programs are: modified vans, computers, and home modifications.
Loan Programs Benefit AT Users
The loan programs have had an impact on the lives of the individuals with disabilities who use the loans to purchase AT. The AT that borrowers have obtained has improved their ability to live independently, become or remain employed, communicate, recreate, and learn. Not only do the recipients of the loans purchase assistive technology devices, they may also receive assistive technology services, such as assessment, training, repair, or customization of a device, with the purchase of their devices. Examples of typical borrowers include the following people:
He purchased a van through the financial loan program. It allowed him to live more independently. "With the van, I don't need assisted living," said the man. "I can go and be self-sufficient. It lets me live. I can go out to the doctor, visit family, and I can see my grandchildren. Without the loan for the van I would have been tied to the house."
Table 2. Loan Assistance Models.
Loan Program Features that Work
The new AFP program is based on the previous experiences that states have had establishing more traditional loan programs for people with disabilities to purchase AT. Many of the state assistive technology programs, funded under the AT Act, helped create AT loan programs in their states and some of these are still in operation today. Typically, they worked with a bank to establish a traditional loan program, some had guarantee or interest buy down features. Some involved people with disabilities as active partners in the programs. Most used funds from their state AT Act project to provide seed money to create these programs.
Based on the experiences of the existing state loan programs, several features have been found to be critical to ensure a programís success. These features have been included in the language of Title III of the AT Act.
1. Focus on low - to moderate-income borrowers. Financial loan programs that focus on loans to low-income and moderate-income individuals with disabilities provide a truly needed financing source to these populations. Low interest rates with a generous repayment period are the most attractive program features to low and moderate income individuals. Also attractive are flexible eligibility criteria, such as those that ease income requirements, or those that factor in the individual's personal and financial stability and credit history.
Maine's loan program is a good example of a loan program that provides a ready funding source for low- and moderate-income citizens of the state. It has a variable interest rate from 0% to prime and loans may be repaid over a time period of 6 months to 20 years. In contrast, California's existing loan is not designed for low- to moderate-income borrowers. Its high interest rate (12.5%) is too high to make it attractive to low and moderate income borrowers. The state's AT Act project is aware of the deterrents of this current program and is working to develop a new program that will be more responsive to low and moderate-income borrowers.
2. Funding source offers choice, not last resort. Financial loan programs that offer individuals a viable and secure alternative funding source provide the best funding choice for their applicants. Financial programs that operate as a "last resort" for funding do not allow for the borrower to choose to obtain a loan. Instead, they require that the individual with a disability prove that all traditional funding sources have been exhausted prior to applying for an assistive technology loan. These conditions impose unnecessary and unwarranted barriers to obtaining funding. Many loan customers turn to the AFP programs because they have had difficult experiences with education, rehabilitation, Medicaid/Medicare systems and choose to acquire the needed device independently, often to retain personal ownership.
3. Importance of consumer involvement. Financial loan programs that involve individuals with disabilities in the development and operation of the loan program are the most successful in securing affordable funding rates and terms and in offering other financial services that prove to be very welcome by borrowers, such as consumer counseling. Successful programs ensure that consumers are involved in as many aspects of the loan program as possible: from initial planning of the loan program; to operation of the program, including loan application review; and program evaluation. Traditional loan programs, operated solely through private banks tend to have minimal consumer involvement.
Older state loan programs are starting to "reinvent" themselves by incorporating these successful components. An impetus to recreating these programs is the matching federal funds for AFPs. In FY 2000, $3.8 million was available to match with funds from the states to create new or enhance existing AFPs, in fiscal year 2001, $15 million is available.
For example in 1994, Assistive Technology for Kansans (AKA), the state AT Act project in Kansas, originally encouraged a statewide bank to develop a traditional AT loan program as part of its Community Reinvestment Act commitment. Only private monies from the bank were used to create the program. As a result, borrower eligibility criteria was rather stringent. Few people with disabilities took advantage of the loans and no consumers were involved in decision-making roles. There was limited involvement by AKA and the project did not receive any data on loan activity.
When the new AFP funding became available in FY 2000, AKA reinvented the AT loan program based on the less than stellar experiences that it had with its earlier traditional loan. AKA partnered with the Kansas Assistive Technology Cooperative (KATCO), a statewide nonprofit established and directed by persons with disabilities that operated a loan guarantee program through a state consumer-controlled credit union. This new collaboration of partners received federal AFP funds and has now increased its outreach and public awareness efforts for the loan program that has resulted in an increased number of loan applications received. It has also significantly expanded consumer services, including financial planning and credit restoration for persons with disabilities. KATCO has also been able to expand its AT cooperative services through strategies such as group purchasing and buying in bulk. All of these components have made this new program a much more successful lending program, reaching those for whom the program was originally designed.
There is a strong interconnection and symbiotic relationship between AFPs and state AT Act programs. The state AT Act programs are strong champions in the initial creation of AT loan programs because they see the benefit of this alternative funding source. The state programs have provided the energy and leadership to facilitate partnerships among the non-profits, community-based partners, and lending institutions. They have also acted as "incubators" to the new programs by providing manpower and in kind support as the fledgling AFPs have worked to establish infrastructure and operate on their own.
The state AT Act programs depend on the AFPs to provide attractive alternative AT funding for citizens with disabilities. AFP funding increases purchasing power and access to needed devices and services for citizens with disabilities across the country. The state AT Act programs know the frustration that individuals have with traditional AT funding sources, such as special education, vocational rehabilitation, and Medicare/Medicaid. The alternative financing programs offer real choice. People with disabilities do not have to exhaust other funding sources before they can use the AFPs.
AFPs depend on the state AT Act programs as well. The success of the loan programs depend on minimizing poor and inappropriate AT purchases. Poor purchases lead to abandonment of the technology and potential loan default. State AT Act programs provide information on devices and services, options for AT evaluations, and alternative funding options for accessing AT. The state programs often facilitate professional assessments for people with disabilities to determine device specifications and often house AT demonstration centers to allow consumers to try out devices prior to purchase. AT Act programs also provide an excellent referral source and collaborative partner for consumers in need of funding resources.
Additionally, the state AT Act programs also work to change AT funding and service delivery systems within the states that affect the need for people with disabilities to incur loans to obtain AT. For example, many state programs have created AT loan closets and lending libraries so that consumers have the option to borrow the equipment they need rather than purchase it directly. Several states have established AT equipment recycling efforts that allow consumers to obtain used, lower-cost devices.
There are additional program services that are usually provided by either the AFPs or the state AT Act programs, that in combination, offer a comprehensive continuum of services that increase access to AT. For example, consumer counseling, peer support, and financial counseling are often provided by either program. This one-on-one assistance encourages individuals to be more critical consumers by working themselves through the maze of funding options. Buying cooperatives that negotiate bulk purchases of AT equipment reduce the price per device. These groups are being formed by AFPs and by state AT Act programs for their customers.
Financial loan programs for assistive technology have significantly reduced a persistent barrier in AT access. These programs allow individuals with disabilities an alternative funding source for obtaining assistive technology devices. AT that has been purchased through these loans allows people with disabilities the independence necessary to live in their own homes, move about in their communities, communicate with others, work competitively, and obtain an education. Additionally, it provides an avenue for individuals with disabilities to build credit, an essential and necessary element to ensure equal standing within their communities.
AFPs are providing critical access to AT. They encompass proven components for success: involvement of consumers in the decision making of the program, loans that are attractive to low- and moderate-income borrowers through guaranteed loans and interest buy-down models, and a funding source that expands the choices of people with disabilities to access AT.
The critical partnerships created through the natural link between the AT projects and their state loan programs have provided meaningful mutual support which is continually building and expanding.
AFP Contact Information
For more information about the individual state AFPs funded under Title III, Alternative Financing Programs, of the Assistive Technology Act of 1998.KANSAS
Kansas Assistive Technology Cooperative
214 SW Sixth
Liberty Building, Suite 205
Topeka, KS 66603
Contact: Mary Ellen O'Brien Wright
Assistive Technology Guaranteed Loan Program
2301 Argonne Drive, Room T-17
Baltimore, MD 21218
Contact: Michael Dalto, Tony Rice
Phone: 410/554-9233 (Voice, TDD)
Phone: 800/832-4827 (Voice/TDD)
$how Me Loans
Missouri Assistive Technology Project
4731 South Cochise #114
Independence, MO 64055-6975
Contact: Marty Exline
Pennsylvania's Assistive Technology Financing Program
P.O. Box 32
Spring City, PA 19475
Contact: Judith McGlew
Phone: 888/744-1938 (voice)
Phone: 877/6937271 (TTY)
Alternative Financing Program
Utah State University
Center for Persons with Disabilities
6855 Old Main Hill
Logan, UT 84322-6588
Contact: Marilyn Hammond
Assistive Technology Loan Fund Authority
8004 Franklin Farms Drive
P. O. Box K-300
Richmond, VA 23288-0300
Contact: Mike Scione
The RESNA Alternative Financing Technical Assistance Project (AFTAP), Cooperative Agreement #H224C000200, is an activity funded by the National Institute on Disability and Rehabilitation Research (NIDRR), U.S. Department of Education (ED), under the Assistive Technology Act of 1998. Produced by RESNA/AFTAP, 1700 North Moore Street, Suite 1540, Arlington, VA 22209, 703/524-6686 (V), 703/524-6639 (TDD), 703/524-6630 (Fax), http:www/resna.org/AFTAP
BOX - success story
Jan Brown was able to purchase a text reader through the Virginia Assistive Technology Loan Fund Authority to help her compensate for impairments caused by a brain injury incurred five years ago from a swimming pool accident. The brain injury affected her ability to comprehend what she was reading and she found that a text reader overcame her cognitive limitations. The Kurzweil Text Reader "has been phenomenal," said Jan. Being able to "read and listen to [text] at the same time, I can do anything I used to do before my injury. I use it for studying, correspondence, and all my reading." Jan has been able to go back to school and get a bachelors degree in nutrition.
1700 North Moore Street, Suite 1540
Arlington, VA 22209-1903
Phone: 703/524-6686 Fax: 703/524-6630 TTY: 703/524-6639
Email: firstname.lastname@example.org http://www.resnaprojects.org/AFTAP