A Growing Credit Market Exists for Prospective Parents
For those wishing to bring children into the world and/or raise them, one of the most heartbreaking of conditions is being unable to conceive due to infertility or financially unable to adopt. The former condition invites a series of potential medical cures, all of them very expensive. The latter is also expensive, but of course requires no medical intervention. In both cases, installment loans can help.
In a study entitled “The Debt Financing of Parenthood” by Professor Melissa Jacoby of University of North Carolina Law School, we see that there is a market for installment loans in the infertility and adoption markets. Consumer lenders have made installment loans available for performing such tasks as buying eggs from other women, obtaining assisted reproduction loans that vary greatly in their potency, and even for adoption loans. These lenders vary in size; some are smaller, nonprofit religious organizations while others work with major, for-profit financiers. In most cases, lenders cultivate relationships with doctors, fertility clinics and adoption agencies and market their installment loan products through those venues. Among other things, this makes it easier for big banks to participate in funding lenders while avoiding the scrutiny of those who would find such loans to be controversial at best.
Approval Time Tends to Mirror That of Traditional Installment Loans
Interestingly, the American Medical Association has in the past advised doctors to “protect their own financial interests” by not extending credit to fertility patients. However, enough doctors (and their partner lenders) have turned away from that advice that a significant market for fertility installment loans exists.
Jacoby presents the example of a 42-year-old woman of modest income who applied for a $20,000 Capital One Fertility installment loan for in vitro fertilization (IVF) where the eggs come from a younger woman. The applicant discovers in minutes whether she’s approved for the fertility loan.
Bank of America and JP Morgan Chase offer installment loans for similar amounts, but they are adoption loans. Depending upon the procedure and specific details, collateral may be required. That collateral can frequently be as large as the applicant’s home. For those borrowers searching for the best rates, there are a variety of specialized nonprofits that can help, provided the prospective parents meet the criteria of the installment loan organization (i.e. religious affinity, marital status, sexual orientation, etc). Controversy aside, they have the right in America as private organizations to establish such requirements.
Regulation in its Infancy
Traditional fertility treatment lending does exist, but the latest wave of installment loans for fertility and adoption bridges a gap, making the notion that only a small group of the elite can fund the growth of their family perhaps an antiquated one. The role that health insurance and fertility lending regulation plays is far from settled.
Infertility Loans: Bias for Heterosexual Couples
The language most fertility loan originators incorporate revolves around a definition of infertility that references difficulties with conception. Few if any lenders in the market deal with “structural infertility,” Jacoby points out. This involves “those who want to be parents but do not want to engage in heterosexual intercourse.”
It should be noted that assisted reproduction loans do not operate in a universe of certainties. There is a significant chance that many of the possible fertility options will not work, but this of course does not grant the borrower a 100 percent money-back guarantee. The costs are most significant, to boot: “artificial or alternative insemination” are less invasive and less expensive than most options here, and it still might cost over $1,000 for just the first try. Jacoby reminds that “the price of just one round of IVF or related processes far exceeds what an average household of four spends out of pocket on health care for an entire year.” If a surrogate is involved, many thousands more dollars can be required. Taking out an additional mortgage, selling vehicles and burning through savings are not uncommon acts for the most motivated potential parents.
Do Tax Laws Help?
According to Jacoby, they offer some assistance in the form of subsidies if the medical expenses exceed 7.5 percent of an itemized taxpayer’s adjusted gross income. The IRS allows this deduction for fertility treatments including IVF and egg/sperm storage. For adoption, which is less expensive up front if the child comes from a state foster home but can be equally expensive in other cases, there is a tax credit for those adoptive families in lower income brackets. There has understandably been some controversy surrounding the perceived subsidization of family growth.
What about Health Insurance?
Not much luck there. Most plans, claims Jacoby, will not directly cover assisted reproduction. Give the lobbyists time and America may see a change in this regard. Convincing lawmakers and insurers that infertility is a disease is necessary here, as is that medical necessity to treat the condition.
Unfortunately, Americans know that insurance is designed not to cover all costs associated with treatment. Thus, the opening for installment loans for fertility exists. A GE Money Bank arm called CareCredit advertises for fertility treatments in much the same way it does for treatments like weight loss, chiropractic and hair growth, writes the author.
Money Back Guarantees? Only for the “Less Infertile”
Installment lenders in this market know how to hedge their bets. Those who even dare to offer money back if conception is not achieved encourage affiliate clinics to market their services to those clients who are only “mildly” infertile – a case where treatment would have the greatest chance of success. Whatever the case, however, the prospective parents still need money to get in the door in the first place. Living in states (or abroad) in areas that make funding such ventures more affordable is popular, as are more dramatic methods. Jacoby gives the example of one patient who told her ex-fiancé that “she needed to use his credit card to finance $8,700 for surgery and therapy for a life-threatening blood disorder” but instead used it for IVF. In another instance, a lawyer embezzled funds from his own law firm to pay debts from fertility treatments and subsequent adoption. The road to parenthood exacts a heavy toll.
Riding Fertility Treatments to Bankruptcy
Installment loans for fertility and adoption services aren’t for everyone. Jacoby points to borrowers filing for Chapter 7 bankruptcy due to fertility and adoption payments exceeding $3,600 per month. Another failed to complete a Chapter 13 agreement despite spending over $800 each month for fertility treatments.
Adoption is Also Expensive
The author states that while foster care adoption can be more affordable up front, the costs for “many adoptions can be $30,000 or more.” Profit and non-profit agencies exist to help defray costs. For instance, the National Council for Adoption (NCA) and Bank of America offer adoption loans up to $25,000. The repay period ranges from 24 to 48 months, making it no small venture for the average consumer. Some products do exist for prospective parents with lesser financial means, with a longer repayment period. One lender advises hopeful parents in the following manner, which could also apply to other types of consumer installment loans:
Before potential adoptive families apply to the foundation, they should first try to obtain funds from other sources such as friends, relatives and home equity loans. Our loans are not a low cost alternative to other financing options; rather they are a last means of financing for families who have already exhausted all other possibilities and funds.
Secured and unsecured loan programs exist through numerous outlets, and Jacoby points out that in most cases, the involvement of major financial institutions is not made obvious.
A Future With No Guarantees
In order for the market for installment loans for fertility services and adoption to continue to grow, Jacoby rightly speculates that lenders will have to extend their reach to those families of lesser financial means. This will of course introduce greater risk into the arena, which will also no doubt lead to an appropriate adjustment of installment loan cost. In order to afford money-back guarantees, lenders must be able to recoup costs.
What lawmakers and insurers decide regarding restrictions upon the market will also be telling for future growth. Currently, there are no states that “mandate insurance coverage for assisted reproduction for same-sex couples,” writes Jacoby. If that changes, the market for assisted reproduction and adoption will also expand. If lenders are worried about offering money-back guarantees, suggests the author, then perhaps they’ll fund those clinics with the highest record of IVF success. Rewarding achievement is certainly not a concept as foreign to American lawmakers as funding assisted reproduction for same-sex couples, is it?