Financial Help for Low Income Americans

Debt is that extra weight you can’t seem to lose. Best-case scenario, it’s uncomfortable and you feel it everywhere you go. Worst case, the pounds of debt keep adding up and present a serious threat to your financial health that requires an expert diagnosis before you can get well again.

Carrying debt can be challenging  for anyone, but it’s especially daunting for low-income families who worry how they will pay monthly bills like rent and utilities, let alone pay off accumulated credit card debt.

The solution is about survival, but that doesn’t mean that adding more debt, especially credit card debt, has to be the result.

There are remedies, and those come in many forms — grants, educational and support resources, strengthening credit scores, and researching debt relief programs.

What Is Considered Low-Income?

The millions of Americans struggling to get ahead may feel like “low income” is an understatement considering the challenges they face. It can be a paycheck-to-paycheck existence, with little attention giving to  planning for retirement, college funds, savings or any other long-term financial goal.

The term “low income” is a technical one when it comes to federal government debt relief programs available to consumers. The programs use a formula to define low-income households, as opposed to “poverty-level households.”

While some relief programs use low income as their criteria for aid, many use the poverty level numbers, which are lower. These programs include Head Start and SNAP – the Supplemental Nutrition Assistance Program (formerly food stamps).

Low-Income vs. Poverty-Level

The difference between “low income” and “poverty” can be the deciding factor when it comes to help with debt (and other financial challenges) from government sources.

Poverty-level households – officially known as federal poverty guidelines – are based on the minimum income a family needs for food, clothing, transportation, shelter, and other necessities.

Generally, a low-income household is one whose taxable income for the year prior was not more than 150% higher than the poverty guidelines. We’ll use that number here, though some organizations may extend the limit to 200%.

In 2024, the federal poverty guideline for a one-person household in the 48 contiguous states was $15,060; that means a low-income one-person household would be $22,590. Alaska and Hawaii have different numbers because the cost of living is higher in those states.

The U.S. Department of Health and Human Services (HHS) defines the poverty guidelines yearly, based on income and size of household. The charts below show what those numbers are for 2024, as well as the resulting low-income household guidelines, in the 48 contiguous states, Alaska and Hawaii.

Low-Income and Poverty Line Criteria in the 48 Contiguous States and the District of Columbia

Note: Families with more than eight persons should add $5,380 for each person for Poverty Guidelines, and $8,070 for Low Income

Source: U.S. Department of Health and Human Services

Alaska Low Income and Poverty Line Criteria

Note: Families with more than eight persons should add $6,730 for each person for Poverty Guidelines, and $10,095 for Low Income

Source: U.S. Department of Health and Human Services

Hawaii Low Income and Poverty Line Criteria

Note: Families with more than eight persons should add $6,190 for each person for Poverty Guidelines, and $9,285 for Low Income

Source: U.S. Department of Health and Human Services

Do I Qualify for Low-Income Government Assistance?

Qualifying for low-income government assistance depends on a number of factors, including the type of debt you have.

The income figures in the above charts are reliant on poverty guidelines determined by the U.S. Census Bureau and updated yearly, based on cost-of-living changes. Federal and state-administered programs use those guidelines depending on the program and region you live in.

If credit card debt is your biggest household challenge — and it is for many, regardless of income – you won’t find any government debt relief programs.

The good news is, there is no shortage of help on other fronts when it comes to low-income debt help. Federal government debt relief programs in the form of financial help include long-time programs such as:

• Supplemental Nutrition Assistance Program (formerly food stamps)
• Temporary Assistance for Needy Families (TANF)
• Medicaid
• Children’s Health Insurance Program (CHIP)
• Unemployment

Most federal financial help for people with low income is administered through the U.S. Department of Health and Human Services (HHS) and the U.S. Department of Housing and Urban Development (HUD). Resources and information can be found at the state level through the state’s health and human services department. Local town or city governments in some states also have resources or information for things like paying emergency energy bills or finding a break on local property taxes for people in a financial crisis.

One disclaimer: Most government assistance programs are only available to American citizens or legal permanent residents of the United States. Undocumented immigrants typically cannot access these government programs.

How to Pay Off Debt with Low Income

Those with low income don’t have a lot of wiggle room to pay anything but bills. But with hard work, people can maximize their money by setting and tracking financial goals, one important first step in deciphering how to get out of debt with low income.

The first step is to decide what debt-relief option to choose.

Ask yourself several questions. What are the goals? What resources can you tap? What percentage of the budget is allotted for housing? Food? Utilities? Transportation?

If you feel overwhelmed, consider free nonprofit credit counseling, like that offered by InCharge Debt Solutions. The counselors are certified professionals who can help you budget and discuss debt assistance options.

5 Steps to Gain Control of Your Debt

Here are five immediate steps that can help gain control of debt:

1. Stop growing debt: It’s important when digging out of debt not to add any new debt. Stop using credit cards where possible, and don’t open new ones. Avoid the trap of payday loans, which tend to spiral out of control.
2. Chart spending: For 30 days, keep track of how much is spent and where it goes. Online banking makes this easy. It’s right there in the statement if you use a debit card as opposed to cash. If you do use cash, keep your receipts, use an app, or write it down in a notebook. You’ll be surprised how much you can trim off your monthly spending.
3. Tally up your credit card debt: It’s human nature to try to ignore how much debt you’re in, but knowledge is power. Adding it all up and seeing what it costs each month is the first step toward eliminating it. Divide the total by how much you can pay a month. For example, if you have $12,000 in credit card debt and you can afford to pay $400 a month, it will take roughly 2.5 years ($12,000 ÷ $400 per month = 30 months) to pay it off. This assumes you don’t use the credit card. These calculations can be assessed by using this credit card calculator.
4. Make a budget: This does need to be complicated or scary. A budget simply means keeping track of how much money comes in, what necessary bills cost (housing, utilities, car, credit card payments), then seeing what is left and where that’s going. Several budgeting apps make this process easier.
5. Stay positive: A good outlook is a key factor in success, even if the budget strays now and then. It’s a cliché to say tough times don’t last but tough people do, but it applies. The road to financial stability may not be a straight one, but persevering through the bumps and turns is important to reaching the goal.

Tips to Stay on Budget and Increase Income

Once you understand your debt, have a budget, and follow a monthly plan, try some of these tips to stay on track and even increase income:

• Debt Snowball: Pay off the smallest debt first, regardless of the interest rate and pay it off, while making minimum payments on other debt. Experts say the momentum from paying off debts can motivate a person to continue paying off debt.
• Sell Some Stuff: Neighborhood garage sale, eBay, Craigslist, Facebook Marketplace – get cash for what you aren’t using.
• Earn Extra Income: Bringing in an extra $50 or $100 a week will help pay down debt much faster. Look into becoming an Uber driver or Amazon flex delivery person. Deliver meals for an app like Door Dash. Work a night or two in a bar, restaurant, or retail store. Be sure to research any extra work closely to make sure it’ll bring in income, rather than waste your time. For instance, Uber drivers can make big bucks, or they can make $12 for an entire day’s work. Find something that will generate the extra income you need and that works with your life, resources, and schedule so it doesn’t cost money.
• Cut Expenses: Cut the cable, get rid of those streaming subscriptions, cut down on the Starbucks trips and eating out. Investigate lower cost cell phone and internet Since you kept track of 30 days of spending, you already know where the places to cut are; now is the time to do it.
• Create an Emergency Fund: Putting away even $10-$25 a week for rainy-day purposes is a great way to avoid financial emergencies.
• Credit Card Refinancing: Cut your high credit card interest rates, and you’ll have lower monthly payments. Transfer balances from multiple credit cards to a single credit card with a lower interest rate or consider some form of debt consolidation.
• Look into Debt Relief: Debt management, debt consolidation loans and debt settlement can eliminate credit card debt. Call a nonprofit credit counseling agency, like InCharge Debt Solutions, and let experts walk you through the process to see if this is a faster, better, and less expensive way to get out of debt.

Establishing and Maintaining Credit

Maintaining good credit is key to financial stability. If you have credit card debt, improving your credit score with on-time payments and reducing balances should be a goal. If you don’t have a credit history, establish one by applying for a low-balance or store credit card. Use it sparingly and pay off the balance monthly.

Managing Debt Collectors and Scammers

People with debt and little money are prime targets for scammers. Understand you’re not alone if you receive a call claiming you owe money. More than one-third of the adult population in the country hears from debt collectors.

Here’s what to know if a debt collection agency calls: If you have a legitimate debt, your responsibility is answering the phone and paying the debt. End of discussion.

However, you do have rights. No matter how much you owe, the collection agency may not harass, threaten, or bully you into paying.

The best approach to avoid debt collection is to contact the original lender and work out a payment plan. If things get to the point where a collector calls, it’s never good to ignore them because that can damage a credit score. Instead, recognize there are ways to stop collection calls and work out a way to repay them.

It is possible to negotiate an agreement with a collection agency on repaying the debt. It may not always be easy, but it’s doable.

“The first thing to do when contacted by a collection agency is to stay calm and not panic,” James Allen, founder of Billpin.com, said. “It’s like finding a wasp in your car while driving — panicking won’t help, but a calm, measured response will.”

If an agreement is reached, it is vital to live up to the terms of the agreement and make full and timely payments.

The Fair Debt Collection Practices Act (FDCPA) sets rules for debt collectors, including:

• How often and when they can call
• No abuse or deception
• Must provide amount of the debt, name of current creditor, how to get name of original creditor.

The Federal Trade Commission has more information.

There are also strict rules for debt settlement companies. If they do any of these, it’s a debt elimination scam:

• Charge fees before providing service
• Tout a “government” debt elimination program
• “Guarantee” credit card debt will disappear or be paid off for “pennies on the dollar.”

Are There Grants to Pay Off Debt?

Government and other relief programs offer grants – money that doesn’t have to be paid back – to help with living expenses and more, for those who qualify. While there are no government debt relief grants, there is free money to pay other bills, which should lead to paying off debt because it frees up funds.

The biggest grant the government offers may be housing vouchers for those who qualify. The local housing authority pays the landlord directly. Other government programs that provide long-term and temporary financial help for bills include the Low Income Home Energy Assistance Program (LIHEAP), Temporary Assistance for Needy Families (TANF), the Special Supplemental Nutrition Program for Women, Infants and Children (WIC), help to pay student loans, and more. We’ll look at these in more depth below, including how to find them.

Be wary of offers to buy lists of government grant programs. They are usually frauds. There is no government program for credit card debt relief. Legitimate debt settlement and relief programs operate by strict rules.

Resources for Low-Income Families

Whether you are a single parent trying to feed and clothe your children, retired, underemployed or having a run of bad luck, day-to-day living is challenging at the low-income or poverty level. But there are resources that can help.

Financial Aid for Education

Federal and private resources can help with student loan debt. If you’re still in school, your financial aid office has resources. Otherwise:

Federal Student Aid — Part of the U.S. Department of Education, has information on grants and financial help.

Private resources for low-income students — QuestBridge, The Education Trust, Bloomberg Philanthropies and FinAId.

» Learn More: Food Stamps for College Students

Food, Housing and Health Resources

Some organizations and programs that have financial help resources and links:

• HealthCare.gov (lower health insurance rates information)
• AARP (health care and other resources)
• U.S. Department of Agriculture Food and Nutrition Services (USDA FNS)
• Medicaid
• National Low-Income Housing Coalition Resource Library
• ShelterListings.org (state links to homeless shelters)

» More: Help with Rent Payments

Utilities and Bills

If you can’t pay your bills, keeping the lights on and the house heated and cooled is essential.

For information on how to lower your utility bills and find help paying electric bills, visit Energy.gov’s Weatherization Assistance Program.

Low Income Home Energy Assistance Program (LIHEAP) is a federal program that helps cover energy costs for low-income families.

Financial Help for Women and Families

Single parenting can add to the challenges of a low-income household. Financial help for single parents is available through:

• WIC – Provides supplemental food and more to low-income pregnant women and mothers, as well as children up to age 5
• CHIP – The Children’s Health Insurance Program provides low-cost health coverage to children in families that earn too much money to qualify for Medicaid.
• TANF – Temporary Assistance for Needy Families provides immediate help for necessities like housing and food.

Financial aid for families with special needs children also is available.

Legal Help

Legal help can come from:

• NWLC — The National Women’s Law Center has a Poverty and Income Support with resources for low-income families.
• The Legal Services Corporation — A nonprofit that provides low-cost civil legal help to low-income individuals.
• The American Bar Association — They list legal aid agencies and pro-bono (free) legal help by state.

General Financial Assistance

Some states have general assistance programs administrated by municipal governments that offer emergency financial help – check to see if yours is one of them.

Online resources that have links to a variety of state, federal and private benefits include:

• Need Help Paying Bills
• Benefits.gov
• USA.gov
• Seniors Resource Guide

Some unique groups can find aid for their situation. Numbers show that African Americans are more susceptible to debt challenges, so there are ways to find financial aid and grants for blacks and African Americans. Financial aid for disabled persons also comes from unique sources.

Long-Term Debt Relief Solutions

 If your debt load is too high to see a way out, the best advice is free. Call a nonprofit credit counseling agency like InCharge Debt Solutions and let an experienced certified credit counselor take you through the long-term solutions available.

The goal for each counselor is to help you learn how to manage your money and regain control of your finances. They will look at your income and expenses, then review debt relief options so you can determine which ones work best with your situation.

If you need more than the free counseling, choices for long-term debt relief include:

Debt management — This program reduces the interest rate and monthly payment on credit card debt to an affordable level. Consumers make one fixed monthly payment to the nonprofit credit counseling agency, which then distributes it to the card companies in agreed-upon amounts. It’s an especially attractive option for those trying to get out of debt with bad credit. There is no credit score requirement.

Debt consolidation loan — Consumers take out a loan and use it to pay off their credit cards. The loan should come with a lower interest rate than what you pay on credit cards, but you’ll need a good credit score to qualify.

For-profit debt settlement — In this program, consumers, or for-profit companies they hire, try to settle the debt by paying less than what is owed. Consumers make monthly payments to an escrow account. When there is enough money in the account, they (or the company they hired) make a lump-sum offer to the credit card company. The card companies do not have to accept the offers. This involves a lot of negotiations and may end up costing more than what you owe.

Credit Card Debt Forgiveness — Is offered by nonprofit credit counseling agencies with a goal of paying less than what you owe. The difference between credit card debt forgiveness and debt settlement is that there are no negotiations. Creditors settle for 50%-60% of what you owe in 36 fixed monthly payments. No interest is involved. This also is known as the Less Than Full Balance Program, and is only offered by a few credit counseling agencies, including InCharge Debt Solutions.

Bankruptcy — This is the option for when you are so hopelessly behind there is no chance you will pay your bills in five years or less. The good news is that a successful bankruptcy filing gives you a chance to start over with a clean slate.

Managing credit issues is challenging in the best of circumstances, especially for low-income households and especially as it pertains to debilitating credit card debt.

There’s no easy road but nonprofit credit counseling can help find the best debt consolidation program for you.