There are many government programs available for those who want assistance in paying off their debt. Depending on your situation, you will find programs that can help make paying off credit card debt a little easier, relief from having to pay taxes on a foreclosure and repayment options for student loans. Government and state grants are also available for those in dire financial trouble.
Credit Card Debt Relief
The Credit Card Act of 2009 includes new regulations in credit card billing procedures. Under the new regulations, credit card companies must bill customers 21 days in advance of their due date and must give customers 45 days notice before changes to their account will be made (changes may include higher interest rates, changes in privacy notices, credit card limit changes). These new regulations give you additional time to prepare to pay your credit card bill.
If changes are made to your account, you now have the option to reject these changes. For example, if the credit card company wants to increase your interest rate, you can reject this without penalty. You will have up to 5 years to pay off the balance of the card at the current interest rate. Keep in mind that your credit card may be canceled if you choose not to accept the new interest rate.
For those who are struggling to pay off credit card debt, additional government regulations have been proposed that would prohibit credit card companies from raising your interest rates while you have an existing balance. This would allow you to pay down the balance in less time.
Mortgage Forgiveness Debt Relief
The Mortgage Forgiveness Debt Relief Act of 2007 protects homeowners from having to pay taxes on the remaining amount of their mortgage. This act is in effect until 2012. When a home goes into foreclosure, the mortgage amount that remains is filed as a canceled debt by the lender. This amount is usually considered as part of the homeowner's income and is taxable. For example, if you borrow $100,000 for a home and pay off $75,000 before foreclosure, the remaining $25,000 is considered taxable income.
Under the Mortgage Forgiveness Debt Relief Act, you will not have to include canceled debts as part of your income. This could save you a lot during tax season.
Student Loan Consolidation
Student loan consolidation allows you to combine all federal student loans (Federal Perkins Loans, PLUS loans, Stafford Loans, subsidized and unsubsidized loans, SLS Loans) to create one monthly payment. This payment may be lower than making payments on several small loans each month.
Consolidating your student loans also lengthens the time you have to repay them. Most consolidated students loans include a 30-year repayment plan. While this may increase the amount you pay in interest for the life of the loan, you will be able to enjoy lower monthly payments. A variety of payment options are available including interest-only payments (pay off interest first, then the principle), income-sensitive payments and graduated payments (payments increase over time).
Before consolidating your student loans, consider repayment options, job outlook, monthly payment amounts and current interest rates. Student loans consolidated by the federal government typically have a lower interest rate than those consolidated by private lenders.
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