Is there a government debt relief program?

While the government does not sponsor debt relief programs, it aims to protect the financial safety of consumers and offers other types of financial assistance.



Elissa Suh

Elissa Suh

Senior Editor & Disability Insurance Expert

Elissa Suh is a disability insurance expert and a former senior editor at Policygenius, where she also covered wills, trusts, and advance planning. Her work has appeared in MarketWatch, CNBC, PBS, Inverse, The Philadelphia Inquirer, and more.

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If you’re overburdened by debt, you may have been told to seek “government debt relief programs”, but to the contrary, such a program does not exist. The US government does not sponsor any type of assistance with debt in the form of debt relief (also known as settlement or adjustment), debt consolidation, or grants specifically geared toward debt. We’ll discuss what the government does offer, and how else you can seek debt relief or debt consolidation.

What is debt relief program?

Debt relief most commonly refers to debt settlement, or the process of negotiating with your lender to settle your debt for less than what you owe. To settle a debt means you’ve decided to pay less than the entire balance.

Whether it’s credit card debt, loans, or medical bills, settling your debt has huge implications on your credit history. Your credit score will go down and your credit report will carry the mark of “settled in full” for seven years.

Debt settlement company

To settle a debt, you can negotiate with your lenders on your own or use a debt settlement company. Even when debt settlement companies are not a scam, they might not pose the best deal financially speaking and can even leave you further in debt.

For-profit companies (like National Debt Relief and Freedom Debt Relief) can charge fees for their services and prove to be time-consuming efforts — debt settlement can often take years.

It’s also likely that only a portion and not all of your debt will be settled. In the meantime, your credit will suffer from all the missed payments while the settlement takes place. Exercise caution and consider the consequences of using a debt settlement company.

Debt consolidation

Debt consolidation is the process of combining all your various debt into one monthly payment. This is done by applying for a new loan to pay back your old ones. You’ll use the money to repay your lenders and creditors on your own, or in some cases, the new loan provider will make the repayments directly for you.

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Unlike debt settlement, debt consolidation does not automatically have a negative impact on your credit. In fact you have a chance to build or improve your credit score, the way you would with any other loan. However, debt consolidation loans also have the same origination fees as standard loans, and if you have bad credit, you may not qualify for a loan with an lower interest rate.

How the government helps with debt

While the government does not sponsor debt relief programs, it does aim to protect the financial safety of consumers and offer other types of financial assistance.


The Federal Trade Commission regulates debt collection agencies and debt settlement companies, which are banned from charging fees in advance for their services.

You can also file a complaint with the Consumer Financial Protection Bureau if you suspect unfair treatment by a bank, lender, or debt collection agency.

Assistance for military servicemembers

Veterans and members of the military can qualify for reduced interest rate on credit card debt and mortgage payments and other benefits under the Servicemembers Civil Relief Act

Federal Housing Administration loans

If you have low to moderate income, you can obtain an FHA-backed mortgage issued by an approved lender that has lower down payments than conventional loans.

Debt forgiveness

The government does offer certain forms of debt forgiveness, if the debt is owed to the government instead of a private company. The IRS might relieve you of your tax debt and the Department of Education might cancel, forgive, or discharge your federal student loans under certain circumstances. The government does not sponsor direct forgiveness of medical debt or mortgages.

Read more about student loan forgiveness.

It’s also important to remember that the government considers forgiven debt to be a source of income, so you may be obligated to pay taxes.

Deducting interest

You can deduct certain types of interest from your taxable income. While this is exactly not debt relief, it will reduce how much of your income is taxed, leaving you with more money to put toward paying down your debt. Mortgage interest, student loan interest, and medical payments that exceed 7.5% of your adjusted gross income are all tax-deductible.

Credit counseling services

The government suggests that you seek counseling from trusted sources accredited with one of the following organizations:

Credit counseling services are offered at low or no cost at credit unions, nonprofits, and religious organizations. They offer financial education and counseling on a variety of topics including:

  • Debt management plans

  • Credit report reviews

  • Mortgage and homeownership

  • Bankruptcy

  • Student loans

  • Small businesses

  • Military members and veterans

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