- 7 min read
- 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.
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Tips and Advice to Find Government Debt Relief and Grants
Are you drowning in Debt? Not sure how to get out of debt?
Do you think the government is the best place to turn to get out of debt? Did you know that the US government has racked up more than $32 Trillion in debt...that is serious debt. While it is true that there are some limited government debt relief programs, don’t count on the government to bail you out.
Does government debt relief exist? If so, what exactly are your options? There are some misconceptions about what the government can do to provide debt relief. In short, the federal government does have assistance programs and grants, but there is no such thing as a straightforward debt relief program issued by the government where your debts disappear magically.
What is Debt Relief
Debt relief is when people or countries try to make it easier to pay back the money they owe. This can mean forgiving some of the debt, changing the payment plan, or combining all the debts into one. The goal is to make paying back the debt less difficult and help people or countries have better control of their money.
Generally, any government program will aid those in hardship, although not everyone in financial hardship will qualify for a government debt relief program. It is good to remember that government debt relief is not a solution for many debt problems, especially with unsecured debt, such as credit card debt. However, it is also a good idea to know your rights and what type of help is available.
To understand how the government can help you find the best debt relief solution for your personal situation, learn about:
- Handling debt and tips from the government
- Government debt relief for different types of debt (Student, Mortgage, Medical/Hardship)
- Government debt relief and protection against debt collectors and lawsuits
Are you suffering from financial hardship? Don't wait for a magical Government Debt Relief Program.
Pre-Debt Relief: Tips From the Government
While the government does not manage its budget like a household, certain principles must be maintained, including keeping a budget, balancing your budget, bringing in income, taking out affordable debt, and building equity.
Naturally, you don’t have the luxury of printing out money, issuing a bond, or managing interest and inflation. However, if a government does not handle its finances prudently, it will find itself in a state of insolvency.
Here are some valuable tips for managing debt:
- Keep a budget: If you need help setting or managing a budget, check out Bills.com Budget Guide.
- Balance Your Budget: If your income isn’t covering your expenses, you can try to cut your costs or increase your income by taking an extra job or working extra hours.
- Choose Debt Wisely: If your income isn’t sufficient to manage your expenses, then a loan can be a way to bridge the gap. Try to focus on healthy debt that builds your net worth, such as mortgages and student loans, just as the government takes out loans to build infrastructure or long-term national projects.
If you plan your finances, monitor your budget, take out healthy debt, build up emergency savings, and then you can avoid getting into debt trouble. Even if you suffer from financial hardship and racked-up debt, good financial habits will always come in handy.
Government Debt Relief for Different Types of Debt
There are specific government programs to help consumers in debt. Since mortgages and student loans are two of the biggest household debts, it is no wonder that the government has intervened to help in times of crisis.
Government Debt Relief for Mortgages
One of the most popular debt relief programs for mortgages was the Making Home Affordable program. This included various foreclosure alternatives, including:
HARP Mortgage - The HARP mortgage allowed underwater borrowers who lost equity in the Great Recession to refinance into lower interest rates and affordable payments. The HARP program helped over 3.4 million borrowers. The HARP program expired at the end of 2018. Both Fannie Mae and Freddie Mac replaced HARP with special high loan to value refinance programs.
HAMP Modification - The HAMP modification expired but set the way for lenders to renegotiate government-backed loans into affordable payments. With the end of the program, lenders are expected to pick up the slack and offer their own modification programs.
Government Debt Relief for Student Loans
The largest consumer non-housing debt in America is student loans. As of Q4 2020, student loan debt surpassed $1.55 billion. Student loan balance increased sevenfold between 2003 and 2020 and comprises more than 37% of all non-housing debt.
Student loans can be a heavy financial burden, making it more difficult to save money, build up a down payment for a home, or make ends meet. Currently, most student loans today are federal student loans, which are often eligible for various government student debt relief programs. 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.
If you are having short-term problems, then consider a deferment or forbearance plan. However, if you are struggling with payments, consider loan consolidation, loan extension, income-driven Plan, or an income-sensitive Plan. There also exist certain loan forgiveness plans.
Government Debt Relief for Medical and Hardship Situations
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. Left with no recourse, many people use up their savings and even run up credit card debt to pay their medical bills and get 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 may 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 their Medlinplus site. As the saying goes: "an ounce of prevention is worth a pound of cure." While much of the information does not help with past debt, it may be possible to avoid some of the medical debt by arming yourself with knowledge.
Talk to Your Creditor
Anyone with secured debt (mortgages and auto loans) should speak to their creditor as soon as they have a problem. Try to work out a plan that allows you to make your payments on time.
Government Protection Against Debt and Debt Collectors
One of the biggest government debt relief programs is the legal protections that it offers. 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 the use of abusive or threatening language, and threats of arrest.
Another area that the government offers debt relief is through collection laws and statute 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.;
One final area that the government offers debt relief is through a court approved bankruptcy, either a Chapter 7 liquidation, or a Chapter 13 court payment plan. Bankruptcy is generally considered a last-resort solution and not many people can qualify for a Chapter 7 bankruptcy or complete a Chapter 13 bankruptcy.
Good News: Alternatives to Government Debt Relief Options
The good news for many people in debt is that there are a number of 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.
Anyone with a good financial situation and good credit should look at their budget, assets, and credit. Perhaps paying off debt more aggressively or taking out a debt consolidation loan will solve your problems.
However, if you are struggling to make your minimum payments, and want to focus on paying off your debt and not your credit, then consider a debt settlement program. Fortunately, the industry is regulated by the government, so you never have to make any upfront payments. Private industry, with firms such as BIlls.com sister company Freedom Debt Relief, now offer you debt relief in cases where the government cannot help.
Need Help Finding a Non-Government Debt Relief Tactic?
Is Government help not enough? With just a few questions and a soft pull on your credit, you can get a free personalized solution.com/estimated-debt to help you get debt-free.
Did you know?
If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q2 2023 was $17.06 trillion. Student loan debt was $1.569 trillion and credit card debt was $1.031 trillion.
A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.
The amount of debt and debt in collections vary by state. For example, in New York, 20% have any kind of debt in collections and the median debt in collections is $1755. Medical debt is common and 6% have that in collections. The median medical debt in collections is $456.
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.