Funding cuts to credit counselors will devastate American communities

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America's financial lending and counseling nonprofits could soon be on the brink of collapse. 

These organizations assist 6 million low- and moderate-income individuals in communities across the country, most of whom are excluded from mainstream credit systems.

By helping underserved populations build and obtain credit, they're expanding access to financial services that enable homeownership, small-business creation and economic mobility — all fundamental drivers of economic growth.

Federal grants are the lifeblood of these efforts. Far from a giveaway, these grants are an incredible investment, with a clear economic return on investment. As just one example, for every dollar invested in housing stability, nine dollars are saved and sent back to the economy in the form of reduced evictions, reduced entrance into the homeless services system, and fewer calls for police and ambulance services.

Yet, these investments are now in peril because of federal grant cuts, including those that have already occurred and those that look likely to be zeroed out or severely curtailed in the next budget.

While financial lending and counseling nonprofits are used to doing more with less, the findings of a recent Credit Builders Alliance survey of 630 financial lending and counseling organizations were dire: 30% lost funding, 29% reduced staff and 22% eliminated programs. Organizations reported they have already eliminated programs for rental assistance and foreclosure prevention programs, housing vouchers for the most vulnerable populations, loan capital for small-business lending, homeless crisis response funding, financial coaching and HUD counseling programs, and rural entrepreneur lending.

What's worse, the survey revealed that without continued federal funding for these proven programs, many of the nonprofits who administer them will simply not survive. All at a time of unprecedented demand for lending and counseling services.

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The interruption, reduction and elimination of financial counseling and lending will decimate low- to moderate-income families and communities in all states across the country, creating significant ripple effects for America's financial success and economic strength as a nation.

Fewer low- and moderate-income individuals will gain access to the homeownership counseling and credit building services needed to qualify for mortgages, slowing community development in underserved areas. Small-business formation will decline as entrepreneurs lose access to startup capital. More families will be evicted, increasing the strain on homeless and other social services.

Most concerning, without these legitimate financial services, more vulnerable populations will be forced to turn to predatory lending options like payday lenders and high-cost check-cashing services, draining wealth and contributing to cycles of disinvestment from already struggling communities.

Simply put, federal grant cuts will mean more foreclosures, evictions, bankruptcies and out-of-business signs at small businesses across the country. Continuing to invest in financial lending and counseling nonprofits will mean more job and small-business creation, wealth formation and U.S. economic growth. 

For the well-being of families in communities across the country and our nation's economy, the choice is clear: We must restore and maintain funding for America's financial lending and counseling nonprofits.