Does the Federal Government Have Free Debt Relief Programs?
You’re committing to a long and worthy 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 a few free government debt relief programs.
These programs are generally available only to people who have certain types of government-related debts, such as tax debts or federal student loans. Unfortunately, the government does not offer any debt relief programs for other types of debts, such as credit cards or car loans.
That doesn’t mean you’re out of luck, though. Read on to learn more about the different options you have for dealing with your debt and whether you’re eligible for a free government debt relief program.
Types of free government debt relief programs
The federal government has a hand in a surprising number of different loan types, and in doing so, it often sets up pathways for borrowers to get help if they’re struggling to repay the debt. Here are some of the different types of debt relief options it offers for various loans:
- Business debt refinance: If you’re struggling to repay a business debt, you may be able to refinance it into an SBA loan with a more affordable payment.
- IRS offer in compromise: If you’re unable to pay a federal tax debt, you may be able to settle it for less by offering a payment amount you can afford.
- Student loan forgiveness: Borrowers with federal student loans can qualify to have their remaining balance forgiven through several different routes, including through repayment plans that tie your payments to how much you earn.
- Mortgage debt relief: The federal government outlines many support options for people with home loans from Fannie Mae and Freddie Mac, or mortgages backed by specific agencies, including the VA, FHA and USDA.
- Servicemembers Civil Relief Act: Active-duty service members can benefit from special debt relief options, such as reducing rates on pre-service loans down to 6%.
State governments may have some additional programs you can qualify for, but they tend to focus on the same populations — homeowners, certain high-need professions, entrepreneurs, for example.
Unfortunately, outside of these options, the government doesn’t offer much support if you’re trying to get out of debt, especially if you have unsecured debts such as credit card debt or personal loans.
Most government support in the form of need-based grants and new low-interest loans for specific uses, (like catching up on overdue home repairs or paying for higher education) rather than offering support for debt that you’ve already incurred elsewhere. Luckily, there are other options, which we’ll cover next.
Other ways to become debt free
You’re not alone if you’re not eligible to have your loans forgiven by the government. The good news is that millions of people have gotten out of debt before using all kinds of different tactics, and you can, too. Here are some of the ways you can do it:
- Focus on your finances: Regardless of how your debt accrued, if you learn how to budget, boost your income and lower your expenses, you can turbocharge your way out of debt.
- Try the debt snowball or debt avalanche method: After you pay off a debt, rolling that payment toward your next debt — either the one with the highest interest rate or the highest balance — can help you save money and make quick progress toward debt freedom.
- Take out a debt consolidation loan: If you’re able to manage your debt payment but just need a little bit of help, combining your debts into a lower-interest loan can help you save money while repaying them faster.
- Negotiate with creditors: You can work directly with your creditors on a more affordable way to repay your debt or even settle it for less than you owe.
- Work with a credit counselor: Nonprofit credit counseling agencies can help steer you in the right direction and offer affordable debt management plans, but they can’t negotiate debt settlement offers.
- Hire a debt relief company: The best debt relief programs offer an affordable and transparent way to assist you with negotiating your debts for less than you owe.
- File for bankruptcy: There are significant downsides to filing for Chapter 7 or Chapter 13 bankruptcy, but it can provide significant relief from your debts under the right circumstances.
What’s the best way to become debt free?
Everyone’s path to getting out of debt will look different, and only you can decide what’s right for you. A good starting place is to speak with a professional if you’re unsure what to do, such as a financial planner or counselor.
Some general ideas apply to everyone, though. For example, you typically need to stop the bleeding; in other words, stop using credit cards and try to reduce your interest rates if possible so your debt stops growing. It’s also wise to focus on building strong financial management skills that can carry you forward past this temporary snag.
If you can afford to make payments on your debt, consider a debt consolidation loan and/or a debt snowball or debt avalanche payoff strategy. That’s not always possible, though, and 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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