First things first, the U.S. federal government offers no programs to help consumers with credit card debt. On the other hand, the government has a number of programs to help students with debt and the IRS offers assistance on back taxes.
Let’s take a look at what these government debt relief programs cover.
Student Debt Relief Programs
A number of debt relief options are built into student loans from the beginning. These include loan forgiveness, deferrals and income driven repayment programs. Student loans can also be discharged if the borrower dies or qualifies for disability.
Forgiveness Programs: Federally backed student loans often come with a clause that will grant forgiveness of a portion of the loan amount if the student works in a public service capacity for ten years — while continuing to make regular payments according to the terms of the loan agreement.
Known as Public Service Loan Forgiveness, it applies to government workers, people who work for certain types of non-profits, teachers, first responders, medical personnel and other occupations deemed useful to society.
There are some rather stringent requirements, which must be followed to the letter, but of you comply, you can see a significant portion of your student loan indebtedness eradicated.
Income Driven Repayment: Students whose incomes won’t support the standard monthly payment can apply for income-driven loan repayment to make keeping up with their loan easier. As the name implies, the monthly note will be tied to the borrower’s income and the size of their family.
The idea is to make sure paying off the loan doesn’t doom a graduate to poverty. Now, with that said, it should be noted interest does continue to accrue, so the longer it takes the pay off the loan the more doing so will ultimately cost.
Deferral Programs: Under certain circumstances, such as the loss of a job, borrowers can request payments on the their loans be suspended for a finite amount of time to help them gain employment without worrying about the impact to their credit rating. Deferments can last up to three years, but it should be noted the loan is not forgiven. Federally subsidized loans do not accrue added interest during the deferment period.
Total and Permanent Disability Discharge: People who suffer total and permanent disability can have their loans forgiven; upon applying and demonstrating they qualify for the relief. As you might imagine such claims are thoroughly vetted and applying for one under false circumstances carries a rather arduous penalty. Still, if you suffer a thoroughly debilitating illness or incident, you can qualify for student loan relief.
IRS Fresh Start Program
The IRS offers a few government debt relief programs to help taxpayers bring their accounts current. Multiple years of back taxes can be combined into a debt consolidation program the IRS refers to as an installment agreement. These plans are designed specifically to help you tie your monthly payments to your income to make resolving your obligation less debilitating to your household budget. Again though, you should be aware the IRS does add interest charges to these payments and the longer it takes to resolve the debt, the more money you’ll spend to do so.
Credit Card Debtors
As we mentioned above, there are no government debt relief programs for credit card debt. However, there are a number of ways to handle it without involving the Feds. The private sector offers solutions such as credit counseling, debt settlement and bankruptcy protection. Moreover, the Federal Trade Commission offers some very useful advice for those who are having trouble with credit card debt.