Financial Loan Programs for People with Disabilities 

Background 

Under Title III of the Assistive Technology Act of 1998, P.L. No. 105-394 (AT Act), Congress established the Alternative Financing Program to provide a new funding source for assistive technology.  Through the program, the federal government provides grants to states to create financial loan programs, such as low cost loans, which allow individuals with disabilities to purchase assistive technology.

What is Assistive Technology?

Assistive technology can be as simple as a wheelchair ramp that provides access to a home, or it can be as elaborate as a computerized leg prosthesis that precisely produces the complex motion of a human leg. The many types of assistive technology (AT) now available in the United States offer individuals with disabilities independence and support in employment, education, health care, information technology and community living.  Because individuals with disabilities typically have high expenses connected with their disability, and high medical expenses, and often have low income levels, it is difficult for many to afford the AT that they need.

Loan Program Grants

Under Title III, Congress appropriated funds for three grant competitions to provide seed monies for these loan programs.  States interested in the grants were required to match federal dollars to create the loan programs.  The ration for match funds differed by grant year.  See Tables 1 and 2.

Table 1.  Loan Program Grant Competitions

Loan Program Activity

Data on loan activity is currently available for the first two years of operation.  The first year of operation ran from October 2000 to September 2001, the second year of operation ran from October 2001 to September 2002.  See tables 3 and 4 for details about applications, borrowers and equipment purchased. 

Table 2.  Loan Activity

*Number of loans closed = loans approved by bank/AFP and accepted by borrower.

Table 3.  Loan Highlights from 2002-2003

*Loans approved by bank/AFP and accepted by borrower.

Program Structure

Title III requires state programs to meet certain conditions to qualify for AFP funding. A state must enter into a contract to administer the AFP with a community-based organization that involves individuals with disabilities in decision-making at all organizational levels. The community-based organization then is required to enter into a contract with a lending institution or state financing agency. Each state must provide consumers with one or a combination of the following financing mechanisms: a low-interest loan fund; an interest buy-down program; a revolving loan fund; a loan guarantee or insurance program; a program operated by a partnership among private entities for the purchase, lease, or other acquisition of AT devices or AT services; or another mechanism that meets program requirements.  Many of the Title I programs administer and/or operate Title III loan programs.  There are currently three states that are operating financial loan programs for AT that are funded by sources other than AT Act funds.  These programs include Maine which has a $5 million program funded through a bond referendum; California and West Virginia loan programs are funded solely with state dollars.  It is not clear whether or not the California loan program, which had been operated by the Department of Vocational Rehabilitation, is still active.

Table 4.   States Operating Some Type of Alternative Financing Program

Dollar amounts represent total program (Federal award and state match).

Table 5. Comparison of Title I and Title III State Lead Agencies

*  Delaware's Title III lead agency is the Department of Vocational Rehabilitation.  However the community based organization is the Delaware Assistive Technology Initiative, within the University of Delaware, which is the lead agency for the Title I project.

#  Pennsylvania received three AFP grants; two of those grants have Temple University as their lead agency, which is the lead agency for the Title I project.

Why More States Do Not Have Loan Programs

States face several challenges establishing and operating an alternative financing loan program.

1.  States are not easily able to acquire "match" funds to start an AFP.

Title III requires that states match one dollar for every three dollars provided by the federal grant.  AFP advocates typically approach their state legislatures or state agencies for match funds.  Most states are currently experiencing large budget deficits, so this requirement is potentially difficult for states to meet.  The difficulty securing match can be seen in the FY 2001 grant competition where $15 million was appropriated and available for state grants, but only $13,633,286 was awarded.  States were not able to raise the required match funds to receive the additional funds.  During the last grant competition, one third of the state grantees did not have the cash mach in-hand at the start of their grants October 1, 2003.  Instead they are relying on acquiring their match funds by the date they need to obligate the funds, which is September 30, 2004.

2.  Too small a loan program is not financially sustainable over a long period of time.

The amount of funds needed to start and maintain a loan program is critical in order for the program to be self-sufficient (fully self-financed).  There is an expectation under Title III that the alternative funding programs become sustainable and remain in operation for many years.  For a loan program to be sustainable, its income must exceed its expenses.  Income from these loan programs is derived from several sources:  interest from loans and un-disbursed funds, fees, from loan fund capital, etc.  Expenses include personnel, rent, marketing, loan loss reserves.  A loan program that does not have much capital does not generate much interest income from its investments and therefore cannot recover its costs.  If a loan program has a small match and receives a small federal grant, it cannot become self sufficient.  It may be better for a state to wait until it has a large enough match and funding reserve to create a large enough program that can sustain itself, than create a small program that is under-funded right from the start and stays that way until it runs out of funds.

3.  A loan program meets the needs of only a segment of the population of people with disabilities.

Loan programs, even low-interest loan programs designed for people with moderate and low incomes, do not reach all people with disabilities.  These loan programs are for a niche market composed of a certain set of people with disabilities who can afford to pay back a loan.  However there are still many people with disabilities who will never be able to afford a loan.   Other funding sources are more appropriate for some consumers.  These include grants, equipment lending libraries, and reuse programs.

4.  An effective loan program requires special partnerships to be formed. These partnerships cannot be forced.

Effective AT loan programs should have strong consumer control and direction, one or more willing lending partners and a strong community based champion in the state with a vision for the loan program.  If these components are not available, a quality program cannot be developed.

5.  AT loans should be part of a larger strategy to provide loans to benefit people with disabilities.

Loan programs for assistive technology need to be seen within a broader context of loan programs to benefit people with disabilities.  Assistive technology is an essential part of an individual’s life.  Currently these loan programs are limited to that purpose only.  The need exists for individuals with disabilities to have access to home loans, regular vehicle loans, etc.  Loans could also be given to businesses that wish to make their offices and shops accessible for people with disabilities, or to individuals seeking self employment.  The limitation of loans exclusively for assistive technology restricts what is possible to meet the whole life needs of the individual.

Also, the various departments of the federal government have varying ability to allow grantees to grow and leverage investment funds to create larger capacity.  The Department of Education has several restrictions on what grantees can do with funds they receive.  They are not allowed to invest funds to create larger capacity, or to pursue fundraising activities with program funds.  Other Departments, such as Economic Development are able to do this in such a way that the funds are leveraged to their maximum capability.