Government Debt Consolidation, Relief, & Forgiveness

People trust that the government will treat them fairly and not try to rip them off.

Consumers struggling under a mountain of debt are vulnerable and easy prey for scam artists.

Naturally, it makes sense to see if any government entities provide debt consolidation loans, relief programs, or offer forgiveness to distressed borrowers.

You will find that the government regulates these affairs more than it sponsors them – with notable exceptions. However, the oversight can help you find trustworthy private companies.

Government Debt Consolidation Loans

The federal government does not directly support or manage any debt consolidation loans or programs. However, the state Departments of Banking and Insurance plus the Consumer Financial Protection Bureau regulates the activity of lenders.

Loans to Pay Off Debt

You will not find government loans to pay off debt. No agency or department issues debt consolidation loans directly to individuals. Plus, even if they did, borrowing money only restructures your obligation.

However, government-sponsored enterprises (GSE) help many consumers obtain home loans with longer repayment terms, lower interest rates, and smaller down payments.[1] Homeowners with sufficient equity could refinance via a GSE to eliminate existing unsecured balances.

  • Eleven Federal Home Loan Banks (FHLBanks)
  • Federal National Mortgage Association (Fannie Mae)
  • Federal Home Loan Mortgage Corporation (Freddie Mac)
  • Financing Corporation (FICO)

Approved Programs

The government does not approve private debt consolidation programs or companies. However, the Department of Justice publishes a free state-by-state listing of approved credit counseling agencies. These recommended agencies offer required education services for consumers undergoing bankruptcy.

  1. Pre-bankruptcy counseling – includes an evaluation of your financial situation, discussion of alternatives, and a personal budgeting plan. The course is required and costs approximately $50 for most people. You can complete the course online, over the phone, or in person. Upon completion, the organization must provide you with a certificate of completion.
  2. Post-filing debtor education – covers how to develop and meet a budget, manage finances, borrow money wisely. Filers must complete this course before discharge.

Government Debt Relief Programs

The United States Government does not back debt relief programs directly to consumers – nor does it offer grants to individuals. As before, several agencies regulate the activities of private companies that provide settlement services.

Do you qualify for debt relief?
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National Debt Relief is not a government agency

Debt Relief Grants

The government does not support hardship grants for debt relief directly to individuals. Grants represent money that you do not have to pay back. Federal departments award grants to universities, state agencies, and non-profit organizations – not to individuals or low-income adults with personal needs.

However, free money does trickle down to local programs that might help you lower certain living expenses. Start at the online resource, and then follow the money trail to a local entity.

Apply locally and use the savings to pay down a portion of what you owe.

Monitored Debt Relief

The government does not fund, back, or sponsor debt relief programs. However, the Federal Trade Commission enforces the Telemarketing Sales Rule, which regulates industry activities. For-profit companies that sell debt settlement services over the telephone must comply with four basic rules.[2]

  1. May no longer charge a fee before they settle or reduce obligations
  2. Must make specific disclosures
    1. How long it will take
    2. How much it will cost
    3. Possible negative consequences
  3. Prohibits them from making misrepresentations
  4. Extends the rules to borrowers calling in response to advertising

Payday Loans

Likewise, the government does not directly support payday loan debt relief. However, both state and federal laws restrict the activities of small-dollar short-term lenders. You might have a legal out if the company violated any of these laws.

  • Three states outlaw cash advances: New Jersey, New York, and Pennsylvania
  • Fifteen other states have usury laws limiting access to high-cost payday loans

The Consumer Financial Protection Bureau (CFPB) rule would require lenders to conduct background checks showing that borrowers can afford the loans. The rule also limits the number of loans made to a single person. The rule is set to go into effect in August 2019.[3]

Government Debt Forgiveness Programs

The federal government does sponsor debt forgiveness for select obligations – the ones they have direct control over, such as student loans and tax obligations. A handful of agencies and programs provide indirect assistance with credit cards, mortgages, and medical balances.

Credit Card

Both federal and state governments offer limited forms of credit card debt forgiveness. However, each program works indirectly and affects only a small, well-defined group – if at all.

Act of 2010

The Credit Card Debt Forgiveness (Relief) Act of 2010 is a work of fiction. Do not place your trust in any online resource claiming that this law will help you eliminate your obligations – especially when they charge a fee.

We cannot find a legitimate information source referencing this regulation. You will not find any citation to the proposed legislation, drafts of bills, or any acts passed by both houses of Congress and signed into law by the president.


The government does not sponsor credit card debt forgiveness due to disability. However, several state benefit programs may help people with temporary or permanent disabilities to increase income or reduce medical expenses. Use the extra free resources to pay down revolving balances.

  • Temporary disability insurance replaces a portion of income in five states: CA, HI, NJ, NY, and RI
  • Paid family leave laws enable caregivers to afford taking time off from work: CA, NJ, NY, and RI
  • Unemployment compensation supports caregivers who quit a job in half the states
  • Workers compensation provides income and medical expense help for occupational incidents
  • Medicaid provides healthcare for low-income adults and children
  • Medicare supports low-cost healthcare for people with long-term disabilities


The government does not require credit card debt forgiveness due to death. However, state-based family laws may affect what surviving family members must repay when a loved one passes away.

  • Joint accounts remain the responsibility of the surviving account holder
  • Single accounts (including authorized users) are the responsibility of the estate
  • Estates with insufficient funds to retire the full balance have unique outcomes
    • Unmarried decedents: family members have no further legal obligation
    • Married decedents: state family laws determine surviving spouse obligation
      • Common law property: surviving spouse does no owe
      • Community property: surviving spouse still owes

Mortgage Principal

The government does not fund mortgage debt forgiveness. However, the US Department of Housing & Development (HUD) provides free counseling help, and federal law provides a temporary tax break to underwater homeowners.

HUD Counseling

US Department of Housing & Development (HUD) offers free foreclosure help. HUD-approved counselors help homeowners who are behind on their mortgages or having difficulty making payments.[4]

The counselors help borrowers organize finances, understand mortgage payment options, and find a workable solution. The CFPB provides a one-stop resource for this help.

Mortgage Forgiveness Act

The Mortgage Forgiveness Debt Relief Act of 2007 allows taxpayers to exclude income from the discharge of debt on their principal residence. Two types of transactions qualify for this benefit.[5]

  1. Amounts reduced through mortgage restructuring
  2. Mortgage balances that are forgiven in connection with a foreclosure

President Trump signed an extension for 2018 in February of this year as part of the Bipartisan Budget Act. He must sign additional extensions in 2019, 2020, and beyond for this to continue.

Unpaid Medical Bills

The government also does not provide any direct forms of medical debt forgiveness. However, a variety of public programs can help patients with leftover bills and other consequences.

  • Medicaid often covers medical bills three months retroactively for new applicants
  • Unreimbursed medical expenses are tax-deductible per IRS rules
  • State temporary disability insurance provides partial income replacement

The Medical Debt Relief Act is a Senate bill introduced in April of 2018. It would amend the Fair Credit Reporting Act and codify into law current industry practices specified in the National Consumer Assistance Plan (NCAP).[6]

IRS Taxes

The US government can directly back tax debt forgiveness because the Internal Revenue Service (IRS) is part of the executive branch. The IRS supports a policy known as an Offer to Compromise.[7]

An Offer to Compromise (OIC) allows you to settle your tax debt for less than the full amount. It is a legitimate option for people who might face financial hardship by paying the entire past-due tax obligation.

  1. Ability to pay
  2. Income
  3. Expenses
  4. Asset equity

Student Loans

The US government can also directly offer federal student loan debt forgiveness because the Department of Education sets the rules and issues the loans. The department supports eliminating unpaid college balances under specific circumstances.[8]

  • Forgiveness
    • Public Service: make 120 qualifying monthly payments while working for a qualifying employer
    • Teacher: teach full-time for five academic years in a low-income school
  • Cancellation of Perkins Loans
  • Discharge
    • Total and permanent disability
    • Death of the borrower
    • Bankruptcy (very rare)
    • Closed school
    • False certification
    • Unpaid refund

Footnoted Sources:

[1] Wikipedia GSE

[2] FTC Telemarketing Sales Rule

[3] CFPB Payday Rules

[4] CPFB Mortgage Help

[5] IRS Home Foreclosure

[6] ACA International

[7] IRS Offers to Compromise

[8] US Department of Education – Forgiveness