Is Government Debt Relief an Option?

Does government debt relief exist, and if so, what exactly are your options? While some of us will use our stimulus checks to pay down debt, others are looking for a little more assistance from the government. But there are some misconceptions about what the government can actually do to provide debt relief.

Government Debt Relief and Grants

There are a lot of advertisements and articles claiming that an abundance of federal grants exist that will provide you with debt relief. They say you just have to know where to look. But have you ever noticed that they never tell you where to look? That’s because these grants to help you pay off your debt don’t exist. There are a variety of programs that assist low-income families to afford necessities, such as rent and certain utilities, but there are no grants that help you pay your credit card debt. Beware of companies advertising such grants: these are sometimes scams that actually end up leading to bankruptcy.

Student Loan Consolidation

Individuals or parents struggling to pay back one or more federal student loans can find some relief in federal student loan consolidation. This program allows you to consolidate your loans into one that has a lower interest rate and one convenient monthly payment. However, this form of debt relief applies ONLY to federal student loans that you took out. Any private student loans are not eligible for a federal student loan consolidation.

Mortgage Debt Relief

The one area where government assistance has recently become available is in the realm of mortgage debt and possible foreclosure. Due to the subprime mortgage meltdown, the U.S Department of Housing and Development (HUD) now offers the FHASecure loan program for those who are at risk of foreclosure and need to refinance their subprime mortgage.

Benefits of the FHASecure Loan Program

The FHASecure program allows you to refinance your subprime or adjustable rate mortgage to lower your interest rate and change the terms of your loan. As a result, your monthly payments will become more affordable, and you will be able to keep your home. With more affordable mortgage payments, you may even have some extra cash to pay off credit card debt or other loans.

Who Is Eligible for FHASecure?

Not everyone with a mortgage is eligible for this program. You have to meet some eligibility requirements before you can take advantage of the program and reduce your debt. Those requirements are:

The original loan cannot be an FHA-insured loan.
You must have an adjustable rate mortgage with a rate that resets between June 2005 and December 2008. Anyone with a fixed rate mortgage is not eligible.
This program is intended for those borrowers who had trouble paying their mortgage after their rate reset to a higher rate.
You must have a clean payment record for your mortgage during the six months before your rate reset. If any of those payments were late, you will not be eligible.
You must be able to demonstrate the ability to make all future mortgage payments at the new rate, including sufficient income and employment stability.
The home that the loan is for must be your primary residence.

If the above debt solutions don’t apply to you, there’s no need to worry. Federal assistance isn’t the only way to reduce your debt. Educate yourself about all the options and improve your financial health today.

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