Editor's choice: National Debt Relief
- No cancellation fees
- Low minimum to enroll
- No upfront fees
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Debt relief is a general term for a program that puts you on track to paying off your debt. This includes debt settlement, debt management and credit counseling. While there are no government-sponsored debt relief programs, there are some programs that you can take advantage of — if you have government-backed debt.
No, there are no government debt relief programs for individuals struggling with debt in general. In fact, government organizations like the Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) warn consumers against using debt relief companies.
That's because debt relief companies often don't disclose the risk of their programs. Since these programs usually require you to make monthly repayments — which many enrollees already struggle with — many people aren't able to complete them in full. In some cases debt relief clients can face lawsuits for nonpayment and end up filing for bankruptcy.
While there is no government debt relief program, there are several government debt assistance programs and regulations that can help you cope with debt.
While the FTC doesn't offer debt relief, it regulates what these companies can and can't do. Debt settlement companies aren't allowed to charge fees before actually settling an account. And they must make the following disclosures to customers before they sign up:
You can file a complaint with the FTC and CFPB if you come across a company that fails to do any of these things. And before you sign up for debt relief, you can make sure the company and its owners are legit by searching for it on the FTC's list of banned debt relief companies and individuals.
The Department of Education has several forgiveness programs for federal student loan holders who work in public service, teach and are individuals with low income. You can also apply to have your federal loans discharged in several situations, such as school closures or if you experience a permanent disability.
You can settle your tax debt through the IRS by applying for an offer in compromise. This is only available to people who are facing financial hardship and can't afford their full tax debt.
If you qualify, you can either pay a lump sum or pay off your account in full with monthly installments. Some law firms offer assistance with this process, but that can tack on an unnecessary expense.
Deduct interest you pay on certain types of loans from your income. For example it's possible deduct up to $2,500 in federal student loan interest payments depending on your income, how much you paid in interest and how you file taxes. Individuals can also deduct interest paid on up to $750,000 of their mortgage balance — or $375,000 if married and filing separately.
Another eligible deduction is medical expenses that exceed 7.5% of your adjusted gross income. While this isn't exactly debt relief, it can make more room in your budget to handle debt repayments.
The Servicemembers Civil Relief Act (SCRA) sets special regulations for anyone who served in the US armed forces on active duty, and covers a period of time after that service ends. This includes interest rate caps set at 6% and restrictions on default judgements, foreclosures and repossessions.
The government has several programs to help individuals struggling with government debt due to COVID-19. They include:
More relief could be on the way, depending on the next stimulus package.
While the government doesn't offer credit counseling itself, the Department of Justice publishes a list of government-approved credit counseling agencies. That's because the government can require individuals to enroll in credit counseling before filing for bankruptcy.
Credit counseling agencies are nonprofits that offer free or low-cost financial advice and debt management programs. But in some cases, fees can be high. This list makes it easier to find an agency that's working in your best interest.
Use the table below to compare companies that offer debt settlement, debt management and credit counseling services.
There are no debt settlement, management or credit counseling programs available directly through the government. But there are other types of debt assistance to help you manage your credit accounts.
Compare legitimate debt relief companies if what the government offers just isn't enough.
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