Are There Any Free Government Debt Relief Programs?
You’re committing to a long and worthwhile journey when you decide to become debt free, but that doesn’t mean you can’t get help along the way. There are several options that can help speed up your progress toward debt freedom, including several free federal debt relief programs.
These programs are usually only available to people with certain types of government-related debt, such as tax debt or student union debt. Unfortunately, the government does not offer any debt relief programs for other types of debt, such as credit cards or car loans.
However, that doesn’t mean you’re out of luck. Read on to learn more about the different options you have for dealing with your debt and whether you qualify for the government’s free debt relief program.
Types of government debt relief programs
The federal government is responsible for an incredible number of different types of loans, and as a result, often stops borrowers from getting help if they are struggling to pay off their debt. Here are some of the different types of debt relief options:
- Business loan restructuring: If you are struggling to pay off business debt, you may be able to refinance it with SBA loans at an affordable rate.
- The IRS offer in compromise: If you can’t pay your federal tax debt, you may be able to settle it for less by giving you a settlement amount. it can be to pay.
- Student loan forgiveness: Borrowers with federal student loans can qualify for debt forgiveness in several different ways. One route is tied to your job through programs like Teacher Loan Forgiveness and Civil Service Loan Forgiveness. There is also forgiveness with income-driven payment plans, where your outstanding balance is canceled after making payments for at least 20 years.
- Mortgage debt relief: The federal government offers many ways to help people with home loans from Fannie Mae and Freddie Mac, or loans sponsored by certain agencies, including the VA, FHA and USDA.
- Servicemembers Civil Relief Act: Active duty service members can take advantage of special credit assistance options, such as pre-service loan interest rates down to 6%.
State governments may have additional programs you can qualify for, but they tend to focus on the same people — homeowners, in-demand occupations and entrepreneurs, for example.
Unfortunately, outside of these options, the government doesn’t offer much support when trying to get out of debt, especially if you have unsecured debt like credit card debt or personal loans.
Most government support for individuals comes in the form of need-based grants and new low-interest loans for specific uses (such as catching up on overdue home repairs or paying for higher education), rather than providing support for debt you’ve already incurred elsewhere.
Other ways to get out of debt
You are not alone if you are not eligible for government loan forgiveness. The good news is that millions of people have gotten out of debt before, and you can too. Here are some of the ways you can do it:
- Focus on your finances: No matter how much your debt has grown, if you learn to budget, increase your income and reduce your expenses, you can charge your way out of debt.
- Try the debt snowball or debt avalanche approach: These are ways to help you create a debt settlement plan. After you pay off debt, rolling that payment back into your next debt—whether it’s the one with the highest interest rate or the highest balance—can help you save money and make faster progress toward debt freedom.
- Take out a credit consolidation loan: If you can manage your debts but just need a little help, consolidating your debts into a single, low-interest loan can help you save money. You can choose a longer payment term that will lower your monthly payments to help with cash flow, or keep paying the same amount. The latter won’t free up any money every month, but it will save you more in the long run.
- Negotiate with creditors: You can work directly with creditors for the most cost-effective way to pay off your debt or pay it off for less than what you owe.
- Work with a credit counselor: Non-profit credit counseling organizations can help get you on the right track and offer affordable debt management programs, but they can’t negotiate special debt settlement deals.
- Hire a debt relief company: The best debt relief programs offer an affordable and transparent way to help you negotiate your debts for less than what you owe. These plans usually take between two and four years to work through all your debts, although your first payment agreement usually comes within three to five months.
- File bankruptcy: There are significant downsides to filing a Chapter 7 or Chapter 13 bankruptcy, but it can provide you with significant relief from your debts under the right circumstances.
What is the best way to get out of debt?
Everyone’s path to getting out of debt will look different, and the best path for you will depend on your circumstances and preferences.
Some general ideas apply to everyone, however. For example, you need to stop bleeding; in other words, stop using credit cards and try to reduce your interest if possible so that your debt stops growing. It is also wise to focus on building strong money management skills that can carry you through this temporary slump.
If you can pay off your debt, consider debt consolidation and/or a debt snowball or debt settlement strategy. That’s not always possible, though, especially if you’ve already started missing payments or don’t have a strong enough credit score to get approved for a good consolidation product. If so, working with a credit counselor, debt relief company and/or filing for bankruptcy can help you get your financial life back on track.
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