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Government debt relief programs—Do they exist?

Government Debt Relief - Does it exist
Betsalel Cohen
UpdatedFeb 27, 2024
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    9 min read
Key Takeaways:
  • Government debt relief programs are limited, but options exist.
  • The Government also helps protect you against debt collectors.
  • There are non-government programs to help you get out of debt.

Debt affects almost everyone. Did you know that U.S. household debt in 2023 was more than $17 trillion? On top of that, the U.S. government owes more than $32 trillion in debt.

Debt can include student loans, mortgage loans, credit card debt, medical, auto, personal loans, and even everyday bills. Although there are assistance programs and grants offered by the federal government, there's no government-issued debt relief program that simply erases your debts.

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What is government debt relief?

Government debt relief refers to various federal, state, or local government programs. The programs are designed to help individuals who are struggling to repay their debts. These programs can help reduce, manage, or even forgive debts for qualified individuals, often depending on factors like income, type of debt, or employment.

The goal is to provide financial relief to those facing hardship and to help them reach a more stable financial situation.

COVID-related government debt relief programs

To help you understand some of the ways government programs work, here are some examples from the COVID era. Although many of these programs don't exist today, they can give you a good idea of how the government can help households manage debt and debt payments.

  1. Student Loan Relief: The federal government implemented a pause on federal student loan payments, which also included a 0% interest rate on these loans. This relief measure was extended several times to help borrowers cope with the economic impact of the pandemic.
  2. Mortgage Forbearance: Homeowners with federally backed mortgages were allowed to ask for forbearance, temporarily reducing or pausing their mortgage payments. This measure was aimed at preventing foreclosures during the economic downturn caused by the pandemic.
  3. Stimulus Payments: The government issued several rounds of direct stimulus payments to individuals and families. These payments were intended to provide immediate financial relief and stimulate economic activity.
  4. Expanded Unemployment Benefits: The government significantly expanded unemployment benefits, including increasing the amount of money people received and extending the duration of benefits. This was crucial for those who lost their jobs or faced reduced working hours.
  5. Small Business Assistance: The Paycheck Protection Program (PPP) gave small businesses loans to keep workers and manage expenses during the pandemic.
  6. Tax Relief: Certain tax relief measures, such as deferring tax filing deadlines and waiving penalties for late payments, were also implemented.
  7. Utility and Rent Assistance: Many local governments and utility companies provide relief. This included stopping evictions, providing rent assistance, and suspending utility shut-offs for non-payment.

Government debt relief–different types of debt 

The good news is that the government offers various programs to help with debt management and make monthly payments more feasible. It's important to keep in mind, however, that there is no one solution that can magically solve all financial problems. Most programs have strict eligibility requirements, and often it's wise to look for alternative non-government solutions.

Overview of different government programs by type of debt:

Type of DebtName of ProgramDescription
Student LoansPublic Service Loan Forgiveness (PSLF)For those in public service jobs who make qualified payments for ten years.
Student LoansTeacher Loan ForgivenessOffers up to $17,500 forgiveness for teachers in low-income schools for five years.
Student LoansIncome-Driven Repayment PlansMonthly payments based on income, with remaining balance forgiven after 20-25 years.
Student LoansStudent Loan Disability DischargeDischarge of student loan debt for individuals who are totally and permanently disabled.
Medical BillsMedicaidProvides health coverage to low-income adults, children, pregnant women, elderly adults, and people with disabilities.
Medical BillsMedicareProvides health insurance to people over 65 and younger disabled people and dialysis patients.
Medical BillsChildren's Health Insurance Program (CHIP)Provides medical and dental coverage to uninsured children up to 19 in families with incomes too high for Medicaid.
Small BusinessSBA Debt ReliefOffers relief for small businesses with non-disaster SBA loans, microloans, and 504 loans.
HomeownersHomeowner Assistance Fund (HAF)Assists with mortgage payments, utilities, and other specified expenses for eligible homeowners.
TaxesIRS Fresh Start ProgramMakes it easier to pay back taxes and offers options like Installment Agreements and Offers in Compromise.
General SupportTemporary Assistance for Needy Families (TANF)Provides financial assistance for a limited time for families working toward self-sufficiency.
UtilitiesLow-Income Home Energy Assistance Program (LIHEAP)Helps with low-income families' home heating and cooling bills.
CommunicationLifeline ProgramOffers discounted phone and internet services to qualified low-income customers.
Military ServiceServicemembers Civil Relief Act (SCRA)Provides financial and legal protections for active service members, including debt relief options.

Government debt relief for student loans

The largest consumer non-housing debt in America is student loans. As of Q3 2023, student loan debt surpassed $1.6 billion. Student loan balances increased about sevenfold between 2003 and 2023, comprising more than 33% of non-housing debt.

Taking out student loans can place a significant strain on one's finances. The monthly payments make it a challenge to save, accumulate funds for a house down payment, or cover basic expenses.

Currently, most student loans today are federal student loans, which are often eligible for various government student debt relief programs.

If you have short-term problems, consider a deferment or forbearance plan. However, if you are struggling with payments, consider loan consolidation, loan extension, an income-driven plan, or an income-sensitive plan. There also exist certain loan forgiveness plans.

If you are struggling with your federal student loans, then you should consult your loan servicer. Also, refer to the excellent student aid government website: https://studentaid.gov/h/manage-loans.

In the news: the Biden Student Debt Relief plan

Since October 2023, significant developments have occurred regarding the Biden Administration's Student Loan Debt Relief Plan. Here's a summary of the key updates:

  1. Supreme Court decision: The Supreme Court issued a decision that blocked the Biden Administration from moving forward with its one-time student debt relief plan.
  2. Transition back to regular payments: President Biden, Vice President Harris, and the U.S. Department of Education's proposal aimed to help federal student loan borrowers resume their regular payments as the pandemic-related support ends. As part of this plan, borrowers could potentially receive up to $20,000 in loan forgiveness. However, the Supreme Court's ruling has impacted the current status of this relief.
  3. Student Loan Repayment Pause: The final extension of the student loan repayment pause was part of the plan. However, Congress passed a law preventing further extensions. As a result, student loan interest resumed on September 1, 2023, with payments due starting in October 2023.
  4. Targeted Debt Relief: The plan initially provided up to $20,000 in debt relief for Pell Grant recipients and up to $10,000 for non-Pell Grant recipients, subject to income thresholds. The current status and availability of this relief are subject to the Supreme Court's decision.
  5. Public Service Loan Forgiveness (PSLF) Program: The plan also included provisions for loan forgiveness through the PSLF program for eligible borrowers. However, the impact of the Supreme Court's decision on this aspect of the plan isn't clear.
  6. Proposed New Income-Driven Repayment Plan: The Biden-Harris Administration proposed a new income-driven repayment plan to reduce future monthly payments for lower and middle-income borrowers. The recent legal developments may also influence the progress of this proposal.

For the latest information and updates on how these developments impact borrowers, visiting the U.S. Government's Federal Student Aid website is recommended. It's also important to be vigilant against scams and to work only with the Education Department and its loan servicers.

Mortgages and government debt relief programs

For many homeowners, navigating the challenges of mortgage payments can be daunting, especially during financial hardships. Fortunately, government-backed programs, including those offered by Fannie Mae and Freddie Mac, provide a lifeline. Here are a few examples of the types of programs designed to offer relief and prevent foreclosure for those struggling with their mortgage commitments.

  1. Short Sale Program: This option allows homeowners to sell their property for less than the outstanding mortgage balance. It offers a way out for those who owe more than their home's current value.
  2. Deed-in-Lieu of Foreclosure: Instead of going through foreclosure, homeowners can transfer the property's deed back to the lender, releasing them from their mortgage debt.
  3. Loan Modification and Assistance: Various programs are available to modify loan terms, making payments more manageable for homeowners facing financial difficulties.

These programs aim to provide struggling homeowners with practical solutions, helping them manage or even restructure their mortgage obligations to avoid foreclosure.

Tip: If you are behind on your mortgage payments, contact your mortgage servicer or an HUD-approved housing counselor. Seek personalized advice to explore the most suitable options for your situation.

Medical and hardship government debt relief

While there is no universal program to help with personal debt, some local programs help people in financial hardships. One of the main sources of financial hardship is due to illness and medical bills. Not only do people lose income, but medical debt can be costly. Many people use their savings and credit card debt to pay for medical care.

The government has a website to help with medical and other bills. You can learn about state and federal health insurance programs that help pay for bills or payment options. Here are some other areas that the government can offer relief: Paying for Telephone Service, Home Energy Bill, Medical Bills, Prescription Drug Costs, and Welfare or Temporary Assistance for Needy Families (TANF).

The government also provides information and programs about medical debt on its MedlinePlus site. As the saying goes: "an ounce of prevention is worth a pound of cure." While much of the information doesn't help with past debt, avoiding some medical debt may be possible by arming yourself with knowledge.

Low-income debt relief programs:

Managing debt can be difficult for people with lower incomes. Some programs directly help families with their budget and help with important costs such as rent, utilities, and groceries. While these programs don't reduce or consolidate debt, they do help provide important relief to manage monthly payments. Here are a few types of low-income debt relief programs:

  1. Utility Assistance Programs: Many local governments and non-profit organizations offer programs to help low-income households manage their utility bills, preventing debts from accumulating.
  2. Credit Counseling Services: Non-profit credit counseling agencies offer free or low-cost services to help low-income individuals regain control of their finances.
  3. Housing and Rent Assistance Programs: These programs help low-income families with housing costs, helping to prevent the accrual of debt related to rent or mortgages.
  4. Supplemental Nutrition Assistance Program (SNAP): Easing the Burden of Food Costs: SNAP aims to help low-income households get enough food, reducing financial pressure. By supplementing their food budgets, SNAP helps recipients have more money to spend on other things like rent, utilities, and debt payments.

Programs like these help people with limited income get financial stability. They offer immediate relief and help long-term, where individuals learn to manage their finances better. For those with low income, exploring these programs can help get to a secure financial future.

What about credit card debt and government debt relief?

The government doesn't provide debt relief programs for credit card debt as it does for student loans and mortgages. However, government-endorsed strategies and protections are in place to help individuals manage and overcome credit card debt.

Consumer Protection Laws: Various federal laws protect consumers from unfair credit billing and debt collection practices. The Fair Credit Billing Act (FCBA) and Credit Card Act of 2009 help consumers with their credit card bills. For example, they address billing issues, restrict the rise of interest rates, and ensure transparent disclosure of account conditions.

Government protection against debt collectors

Unfair and deceptive collection practices can add strain to a debt problem. The government offers many consumers debt relief through its legal protections. Here are a few examples of how the government can help:

Regulating debt collection: This includes the Fair Debt Collection Practices Act (FDCPA), which limits the actions of debt collectors. If you are behind in payments, then the last thing you want to face is harassment from a debt collector. The FDCPA prohibits debt collectors from very specific behavior, including using abusive or threatening language and threats of arrest.

Collection laws: Another area that the government offers debt relief is through collection laws and statutes of limitations. These offer you protection in the case of a lawsuit and a potential judgment. These laws are both state-specific and relate to the type of debt and assets.

Bankruptcy: The government also offers debt relief through a court-approved bankruptcy. This is called a Chapter 7 liquidation or a Chapter 13 payment plan. Bankruptcy is a last resort, so not many people can qualify for a Chapter 7 bankruptcy or complete a Chapter 13 bankruptcy.

It's important for individuals dealing with credit card debt to understand their rights and options. Government websites, like the Federal Trade Commission and the Consumer Financial Protection Bureau, can help with credit card and other types of debt by providing resources and information.

Check your debt relief options

You have three (or more) options to handle overwhelming debt. Talk to a Bills.com debt resolution partner to discuss your debt solution options.

Start now

Good News: alternatives to government debt relief Options

The good news for many people in debt is that there are several debt relief options that don't include the government. There are solutions for people in good financial shape and for those in a financial hardship and struggling with credit card debt.

Here are a few options that require the means and discipline of sticking to a budget and repayment plan.

  1. The snowball debt method or taking out a debt consolidation loan are effective ways to pay back your debt aggressively.
  2. Some credit cards offer a 0% introductory rate for balance transfers, allowing you to pay off your credit card debt without paying interest.
  3. Non-profit credit counseling agencies help with debt management, budgeting, and lowering interest rates.

If you're struggling to make the minimum payments and prefer to focus on paying off your debt rather than your credit, then consider a debt settlement program. The good news is that the government oversees this industry, meaning you won't have to pay anything in advance.

Private industry, with firms such as bills.com sister company Freedom Debt Relief, can offer you debt relief for credit card debt and other unsecured debt, in cases where the government can't help.

Bills action plan–Government debt relief programs

Here are some valuable tips for managing debt:

  1. Keep a budget: If you need help setting or managing a budget, check out the bills.com Budget Guide or an online app like Achieve MOLO.
  2. Take a good look at your debt: There are many different types of debt, and each one might have a special program. Pay special attention to government-backed student loan programs.
  3. If you are struggling with monthly payments, talk to your lender.
  4. Look beyond government debt relief programs. Talk to a debt consultant to help analyze your situation and find a personalized debt solution.

Frequently Asked Questions

Are government debt relief programs free?

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Government debt relief programs can have associated costs, depending on the type of relief sought. For instance:

  • Bankruptcy: Filing for bankruptcy involves court fees and potentially attorney fees, though the process itself is a form of debt relief.

  • Student Loan Forgiveness Programs: Generally, these do not have a cost for application, but private companies offering assistance might charge fees.

  • Other Programs: Some programs might have minimal administrative costs.

It's important to research each program thoroughly to understand any potential fees or costs associated with the debt relief process.

How long does debt relief take to work?

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Timelines vary depending on the type of debt and relief program. The time it takes for debt relief to work can vary greatly depending on the type of program and individual circumstances. For instance:

  • Student Loan Forgiveness Programs can take 10-25 years based on the specific program and repayment plan.

  • Bankruptcy processes like Chapter 7 can take a few months, while Chapter 13 bankruptcy can take 3-5 years to complete.

  • Debt Settlement Programs may take 2-4 years.

  • Debt Consolidation Loans depend on the term of the loan, often ranging from 2-5 years.

Each scenario is unique, and timelines can change based on various factors, including the amount of debt and the terms of the relief program.

Struggling with debt?

Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q4 2023 was $17.503 trillion. Auto loan debt was $1.607 trillion and credit card was $1.129 trillion.

According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

The amount of debt and debt in collections vary by state. For example, in Mississippi, 35% have any kind of debt in collections and the median debt in collections is $1598. Medical debt is common and 16% have that in collections. The median medical debt in collections is $719.

Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.

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10 Comments

BBenjamin Garcia, Mar, 2023
Betsalel, well-written! You have rightly talked about Chapter 7 and Chapter 13 bankruptcy as a last resort to debt relief. But why wait till you have no other choice? Apply for the same in the first instance if you are being harassed by calls and notices from creditors. Work with an attorney who can provide legal representation on the most compassionate and competent terms. The best can help explore out-of-the-court options as well for the best outcome.
BBillie Patton, Dec, 2022
Can I get help with a reverse mortgage gone bad?
TThomas Baker, Jan, 2021

I am a 58 year old disabled man. I have almost 9,000 dollar federal tax debt, 5,000 is owed to the state of Wisconsin 7,000 in credit card debt and almost 3,000 in medical debt. I am on social security disability what are my options?

JJosh, Aug, 2021

Hello Thomas.

Thank you for reaching out. We have a partner name Freedom Debt Relief that would potentially assist you with your 7K credit card debt, and 3K medical debt. They would help reduce the monthly cost that can potentially help allocate funds to savings and give you enough cushion to resolve the federal and state debt.

If you have any questions please reach out to them at 800-852-1431. They would be happy to assist you.

Regards, Josh

llucas, Jul, 2020

Your credit determines your financial life. Ever since the pandemic started, my credit went downhill. I maxed out all my credit cards in April totaling $8685 in credit card debts. I called my creditors and told them what I am dealing with and am in a COVID hardship program with each of them What am I going to do when the leniency from the creditors ends?

DDaniel Cohen, Oct, 2020

Lucas, you ask a great question. I assure you that you are not the only one who will be facing this situation and I commend you for thinking in advance about how best to deal with the situation you know is coming.

The best advice I can give you is to not panic. You will have options available. A lot will depend on what you can afford to pay each month, when the time arrives that your creditors are being less flexible and demanding a significant monthly minimum payment.

If you are unable to pay all your minimum It could be that a program that helps people in financial hardship may be a good choice, whether bankruptcy, a debt management program, or debt settlement.  You can start looking at the different debt relief options, so you have time to consider the pros and cons, then finalize your decision once the time comes.

You started your question commenting on the importance of credit.  Don't stress over that. It is easier to rebuild credit than to pay off debt. Once you get the debt solution in place you can formulate a plan to improve your credit score.

AApi munokoatini, Jun, 2020

I'm not sure how much I owe but would l love help an to better my credit rating.

DDaniel Cohen, Jul, 2020

Api, what kind of debts you have? Are you behind on any? Do you have steady income? What is your current credit score? When is the last time you reviewed your credit report?

Those are some of the question that need to addressed to figure out what options are available.

AAnonymous, May, 2019

Thanks for the tips!