- Plasma Donations Curb Demand for Payday Loans
FRB of St. Louis
Research by John Dooley and Emily Gallagher (a research fellow at the St. Louis Fed’s Institute for Economic Equity) examined plasma donation as an alternative to high-cost debt (e.g., payday loans). The authors tracked the opening of 589 plasma centers from 2014 to 2021, which they paired with Experian’s alternative finance credit bureau data to understand how borrowing habits changed in communities surrounding plasma centers. They found that:
- The typical plasma donor was younger than 35, did not hold a bachelor’s degree, earned a lower income and had a lower credit score than most Americans. Donors sold plasma primarily to earn income to cover day-to-day expenses or emergencies.
- When a plasma center opened in a community, there were fewer inquiries to installment or payday lenders. Inquires fell most among young (age 35 or younger) would-be borrowers.
- Four years after a plasma center opened, young people in the area were 13.1% and 15.7% less likely to apply for a payday and installment loan, respectively.
- Similarly, the probability of having a payday loan declined by 18% among young would-be borrowers in the community. That’s an effect on payday loan borrowing roughly equivalent to a $1 increase in the state minimum hourly wage.
- The growing trend of plasma donation raises two concerns. First, more information is needed on the long-term health risks of regularly donating plasma. Second, financially constrained households provide a large portion of the world’s plasma supply.