Americans collectively hold more than $14 trillion in consumer debt. This means the average personal amount of debt per person is nearly $93,000 — including more than $5,000 in credit card debt and more than $16,000 in personal loans on average.
Unsurprisingly, many Americans are actively searching for ways to address these debts. Continuing to juggle payments month after month can become burdensome over time while costly interest charges make it that much harder to become debt-free. It’s no wonder so many borrowers are looking for a way out of this vicious cycle.
Debt consolidation is one strategy meant to combine multiple debts so they become simpler to pay off and end up costing less in the form of interest.
Borrowers investigating how to consolidate debts may be wondering: Are there any government consolidation programs to try? Read on to learn more about debt consolidation options.
Do Government Debt Relief Programs Exist?
The U.S. government does offer certain hardship programs for certain types of debt — as well as ample advice on how borrowers can access debt relief resources, particularly in the aftermath of the COVID-19 pandemic.
However, there is no government-backed debt relief program specifically meant to help borrowers consolidate. In fact, the Federal Trade Commission warns consumers to steer clear of any debt relief offers to advertise a “new government program” to get out of credit card debt because it may actually be the warning sign of a scam. As convenient as it would be if there were a centralized federally sponsored debt relief option, there is really not. Anyone claiming there is maybe trying to sign you up for a scam to gain access to your personal information.
Rather than government debt relief programs to consolidate debts, there are both private companies and not-for-profit organizations that exist as options for borrowers trying to reduce their debt loads.
Not-for-Profit vs. Private Debt Consolidation
One example of going the not-for-profit debt consolidation route would be working with an accredited credit counseling agency. The first step here is typically a free consultation with a credit counselor to go over your budget and come up with a personalized plan of action. From there, you may elect to sign up for a debt management plan (DMP) through the same agency, which allows them to act as a “middle man” between you and your creditors — you’ll pay the agency and they will, in turn, disburse your funds while also trying to get better repayment terms for you. The National Foundation for Credit Counseling — also known as the NFCC — is one such organization that audits credit counselors and accredits only those firms adhering to
An example of working with a private lender to consolidate debts would be taking on a low-interest personal loan from a bank, credit union, or online lending company. Using these funds to pay down all your other outstanding balances at once can help you streamline down to one fixed payment per month while lowering the interest rate for which you’re responsible, too.
Whether you go the non-profit route or use a debt consolidation loan from a private lender depends on a few factors, namely your credit rating and your income.
While the government can certainly act as a hub of resources for how to go about pursuing different forms of debt relief, it does not offer a formal consolidation program at this time — so be extremely wary of any offers you receive claiming it is the government reaching out to help you with your credit card debt. Rather, stick with reputable consolidation loan lenders and non-profit credit counseling agencies as you work toward the goal of getting out of debt.