Top 5 Financial Moves Dreamers Should Make Now
If you’re one of the 700,000 dreamers, you face a difficult financial situation.
In February 2018, the Supreme Court declined to hear the Trump Administration’s appeal challenging the Deferred Action for Child Arrivals program — better known as DACA. And in March, Congress failed to develop a permanent solution to protect DREAMers from deportation.
With the future of DACA still uncertain, many dreamers are left wondering how to handle their finances. Is it worth the effort to pay down existing debts, or take on even more to fund education or homeownership?
If you’re one of the many DREAMers worried about their financial future, don’t give up hope. There are preparations you can take to ensure that your money and credit will remain stable.
Here are five steps a DREAMer can make today to prepare for an uncertain future:
1. Take stock of your finances — both assets and debts
If your citizenship status is at stake, the best thing to do is take stock of your finances. You need as clear a picture as possible of where you stand now before you can begin making a go-forward plan.
Assets — such as a home or a car — should remain in your name as long as you continue to make payments. Any identification, such as a social security number (SSN) or individual taxpayer identification number (ITIN) should remain yours as well.
If you are deported, your assets should still remain in your name. But so should your debt.
“Even though it’s tempting to think that if no solution is passed you can just default on your debt, this can affect you negatively in the future if you end up seeking adjusted status.”
– Javier Gutierrez, DREAMer and Personal Finance Blogger at DreamerMoney.com
Even if you leave the U.S., you’re still responsible for your debt. And while you are still in the country, lenders may have the opportunity to sue over missed payments. Any action taken against you may result in legal costs.
It’s possible that lenders and debt collectors may pursue debt across borders. This is a process known as “International Debt Recovery“. While it’s an infrequent and expensive process, lenders may take action if you owe a large debt.
Failure to repay can hurt your credit score. Even though your credit score won’t follow you outside the U.S., it won’t just disappear. While in the country having a low credit score can create difficult financial situations.
Begin by gathering your financial information in one place. This includes assets (such as bank accounts and personal property) – and debt. You need a way to manage both.
First, focus on monthly bills and necessary costs such as gas, food, electricity, etc. Then you can address debt.
Take some factors into account with each debt. Write down any collateral at stake. Examine the remaining repayment period for all debts. And determine whether there are co-signers on any loans.
Once you have this information, you can begin budgeting resources for repayment.
2. Keep at least one bank account open — and have a plan
No matter your status, a financial institution is still the safest place for your money. If at all possible, keep at least one account open to pay for assets or cover existing debts.
If you have children, and want them to remain in the country, keeping your account open may be the most important step you can take. An account managed by you can help provide a child with a sense of financial security.
“One major pitfall that must be avoided is to never try to apply for public assistance or government welfare program when you are without legal status in the U.S. Accepting public benefits can close many future doors in the immigration context.”
– Nicole Kozyci, Managing Partner, Kozycki Law, LLC
If you have more than one account open, see if it’s possible to consolidate. Managing funds with one account is much simpler than having to juggle two or three at a time. If possible, prioritize accounts connected to major assets, such as a mortgage or auto loan.
Research your financial institution’s policies on online account management. Determine which banks have ATMs or branches available in your birth country.
But be wary of foreign transaction fees — extra charges added for international transactions. When added to regular charges, they can drain your account.
Also, research each financial institution’s policies on inactivity. Your bank may close your account if it is inactive for a specified time.
Dreamers, If you must close your account:
First, inform your bank of your intent. Many organizations will work with you to transfer funds in a secure fashion. Speak with your bank on its policies for closing accounts.
Others may require you to deposit your funds into a check or prepaid card. If you’re faced with the second option, store your card/check in a safe place. Know where you can deposit your money, and do so as quickly as possible.
If you must close your account but you still have debts, talk with your lenders. Many lenders will work with you if you approach them in good faith with the intent to continue paying your debts. You may be able to develop a payment plan from abroad.
Gather any information you can about a possible living situation in your birth country before speaking with your lenders. This information should include your:
- Point of contact (phone number / email address)
Lastly, ask friends or family members if they have open accounts of their own. One option may be for you to transfer funds to someone you trust.
If no one has an open bank account, try to persuade them to sign up for one. Undocumented immigrants can still sign up for a bank account using an Individual Taxpayer Identification Number, consular identification card, or city identification card (not available in all cities).
3. Evaluate your loans
Once you know your money is in a safe place, your next step should be to cut as much debt where you can. Continue to focus on meeting monthly bills and necessary expenses first. And always make (at least the) minimum payments on all existing debts.
(Depending on your financial situation, you may want to pay down credit card debt before loan debt. Find a strategy that works best for you.)
Examine the legality of loans before you begin repayment. According to the Appleseed Foundation, “Debt collectors have a limited time during which they can sue debtors for nonpayment. Such time limits differ by state and are set by each state’s statute of limitations.”
If you’re unsure about the legality of a loan, contact a local immigration advocate.
Examine each loan’s repayment term. Short-term, high-interest loans, such as payday or auto title loans, pose more liability. Lenders may be more active in collecting their debt, and your personal collateral may be at risk. If any of these loans are outstanding, focus on repaying them first.
Another option may be debt consolidation — combining multiple small debts into a single bad credit loan. Doing so means you’ll face fixed monthly payments, instead of worrying about multiple debts.
Take any collateral you may have on your loans into account. You may risk losing your property if you default. Or you may want to consider refinancing an existing loan by adding collateral. If refinancing makes it easier to pay off a loan, do so.
The same goes for adding a co-signer. It’s difficult to convince lenders to refinance if your status is in question. But adding a U.S. citizen as a co-signer may make refinancing possible. Be sure to choose someone you trust.
If you’re a student:
Students share many of the same concerns as DREAMers who have already graduated. Both share expenses such as housing costs, auto loans, etc.
But you have another concern: How to pay for your education. If you’re unsure of your citizenship status, should you consider taking on more debt?
“While they (DREAMers) are in the United States they should continue to pursue their education hope to realize a dream of staying in the U.S. for some time and working professionally.”
– Nicole Kozyci
DREAMers often do not qualify for federal or state financial aid – including loans. That means private student loans – often at much higher interest rates – may be the only option. Repayment terms will vary by lender.
4. Minimize credit card debt
Once you know your money is in a safe place, your next step should be to cut as much debt where you can. Continue to focus on meeting monthly bills and necessary expenses first. And always make minimum payments on all existing debts.
(Depending on your financial situation, you may want to pay down loan debt before credit card debt. Find a strategy that works best for you.)
If you’ve got more than one credit card, now is the time to begin paying off and/or canceling non-essential cards. As with loan debt, failure to repay can result in debt collection or damage to your credit score.
Examine which, if any, of your credit cards you could keep. Research which of your cards will operate outside of the U.S., as well as ATM availability. Make a note of any foreign transaction fees that come with your card. As with bank accounts, make sure you can manage your card from a distance.
Be mindful that any credit cards issued in the U.S. are backed with U.S. currency. Any transactions you make overseas will be subject to a foreign exchange rate.
Focus on paying off or canceling cards by remaining debt. If you can pay off a card completely, do so as quickly as possible. This way, you’ll be able to cut another source of debt.
Otherwise, contact your credit card issuer. Provide it with as much information as possible, and pay down what you can. Develop a payment plan for the rest of the debt.
5. Find someone you can trust
Maybe you’re looking to buy a home, finance your education, or add another asset to your life. If you’re hesitating to take on another debt, there are steps you can take to reduce the risk.
Create a joint bank account
Keeping finances active in the U.S. means finding the help of someone you can trust. That someone can be a family member or a close friend, but he or she needs to be a U.S. citizen.
This individual can take co-ownership of your assets and debts. This can include your bank account, so be sure to choose this person carefully.
It’s possible to create a joint bank account. You can add someone to a bank account and give that person the power to take co-ownership of your funds. This can keep your account from becoming inactive and help pay any bills or expenses you may have.
But there are some drawbacks to this approach. With a joint bank account, both parties can legally access all the funds in the account. And if either party defaults, creditors may have the ability to pursue assets in the joint account.
Grant power of attorney
One alternative is to consider giving a trusted person Power of Attorney. Someone with power of attorney can manage your assets on your behalf — within reason.
“If you find yourself in the unfortunate event of removal procedures, having an attorney at hand will only help you as well as a trusted individual with the power of attorney who can make emergency decisions for you.”
– Javier Gutierrez
There are four different types of power of attorney: General, financial, limited, springing. You may be able to define the parameters of the agreement or add a “triggering” event.
If you’re a student, and you want to continue your education, a trusted someone can act as co-signer on a loan. Or, if that person has power of attorney, he or she can act as your guardian and take out a loan on your behalf.
Some institutions may reject power of attorney. In these instances, consult with an immigration advocate.