Financial Help for Low Income Americans
Federal, state and local governments offer hundreds of programs to help low-income families learn how to manage their money and make ends meet.
Choose Your Debt Amount
About Financial Help for Families
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.
People in low-income households must worry daily about how they’ll pay the bills this month or even this week. It’s a paycheck-to-paycheck existence with little planning for retirement, college funds, how much to put in the savings account … basically, no thoughts about getting ahead.
Mostly, it’s about survival and avoiding the plunge deeper into debt, especially credit card debt, the ultimate temptation for all consumers.
What Is Considered Low Income?
If you’re one of the millions of Americans struggling to get ahead, you probably have months when the term “low income” falls short of covering the difficult challenges you face. But the many federal debt relief programs available to consumers rely on certain defining standards for low-income households versus poverty-level households.
Understanding the difference is important. Don’t confuse the two.
A “poverty level household” is based on the minimum amount of income a family needs for food, clothing, transportation, shelter and other necessities. It is also known as the federal poverty guideline.
A “low-income household” is one whose taxable income for the preceding year did not exceed 150% of the poverty level amount.
So, the standards for low-income households are 50% higher than those of a poverty-level household. In real numbers, in 2020 a one-person, low-income household would have income of $19,140, while a one-person, poverty-level household would have income of only $12,760.
The Department of Health and Human Services (HHS) puts out charts every year that define both low-income and poverty-level limits based on income and size of household. The charts below show what those numbers are for 2020 in the 48 contiguous states with separate charts for Alaska and Hawaii that reflect the higher cost of living in those two states.
48 contiguous states and the District of Columbia, as follows:
Household SizeLow-Income LevelPoverty Level
|*Households with nine or more, add $6,720 for low-income and $4,480 for poverty level each person more than eight.|
If you are a resident of Alaska or Hawaii, click below to find charts specific to your state.
Do I Qualify for Low-Income Government Assistance
The short answer: that depends.
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.
That disclaimer aside, whether you qualify depends on the program. Income levels for different programs vary.
OK, here’s one more disclaimer:
As you examine the programs that may fit your needs, just know that if credit card debt is your biggest household challenge — and for many low-income Americans (and higher-income Americans) it is — there are no government consolidation programs for credit card debt.
But there’s no shortage of help on other fronts.
The federal government uses the income levels in the charts above to determine eligibility for programs such as the Affordable Care Act, Supplemental Nutrition Assistance Program (SNAP Benefits), Public Health Service Act, Medicaid, Children’s Health Insurance Program, Title X Family Planning, Head Start and many others.
Being designated as a low-income family could mean you qualify for the U.S. Department of Housing and Urban Development’s public-housing program. You can qualify for low-income housing if you earn no more than 80% of the median income level for your county or city. By earning 50% of that median income level, you would meet HUD’s lowest low-income limit.
The income figures in the charts are based on poverty levels determined each year by the Census Bureau. The poverty guidelines are issued in January and only reflect price changes through the previous calendar year.
After a four-year decline, the Census Bureau reported in 2020 there were 37.2 million people in poverty. That is approximately 3.3 million more than in 2019.
How to Pay Off Debt with Low Income
At the low-income level, there’s obviously not a lot of wiggle room for disposable income. But with some resourcefulness, hard work and imagination, families can maximize their money by setting and tracking financial goals.
Here’s the money quote that should motivate you.
Paying off debt is rarely about how much money you make. It’s about managing the money you have.
There are many high-income earners who also live paycheck-to-paycheck because they’re frivolous with their money. The most financially successful families manage the money they have and budget accordingly.
For low-income families, here are some tips that will help you manage. The first step is to make a plan. What goal are you trying to achieve? What resources can you tap? What percentage of your budget do you allot for housing? For food? Utilities? Transportation?
If you don’t feel experienced enough to create an affordable budget, get a free consultation with a nonprofit credit counseling agency like InCharge Debt Solutions. The counselors are professionals who offer assistance to low-income families trying to escape debt.
Here are other suggestions that should be considered resources for low-income families to regain financial control:
- Get the right mindset. Staying positive, even if your budget strays off course now and then, is a big factor in success. Scrutinize where every dollar goes. Maybe take part-time work to open a few new revenue streams. Many people have done this and many were in worse shape when they started. If you can stay positive and diligent, good things will happen.
- List All Your Debts. Get out the legal pad. Figure out how much you owe. Hide nothing. This is a simple accounting of where you are starting.
- Keep Track of Your Money. Even when people can barely rub two nickels together, they often have no clue where their money is going. You must chart your spending for 30 days, whether you use a note-taking app or a little notebook that you carry around. Either way, record every single purchase — no excuses. This will give you a picture — maybe for the first time — of where your money flows each month.
- Make A Detailed Budget. This will help identify how much you have remaining each month to pay off your debts. Take your total debt and divide by the amount you have remaining each month. Now you roughly know how many months are needed to pay off your debt. Example: If you have $12,000 in credit-card debt and you can afford $400 each month toward paying it down, you will need roughly 2.5 years ($12,000 ÷ 400 per month = 30 months) to pay off that debt. This assumes you don’t keep spending on that credit card — an advisable strategy, by the way.
- Try the Debt Snowball. The strategy espoused by self-made financial guru Dave Ramsey has made him rich beyond his wildest dreams from his popular radio show and book sales. It’s gained him legions of believers. Ramsey preaches paying off your debts smallest to largest (regardless of the interest rate). It’s the belief that momentum (the snowball effect) can trump the math that says higher interest debt should be your first target.
- Accelerate the Payoff. OK, we already know your first concern. What if I don’t have much (or any) money at month’s end to apply to my debt? Then you must get creative and probably make a few sacrifices. Here are some ways:
- Sell Some Stuff. Neighborhood garage sale, eBay, Craigslist, Facebook Marketplace … you name it. Get some cash for the stuff you aren’t using and really don’t need. We all can do this.
- Earn Extra Income. Bringing in an extra $50 or $100 a week will help you pay down debt much faster. With the Internet, you can run a business from home. Become an Uber driver or Amazon flex delivery person. Work one night in a bar, restaurant or retail store. Check out the best side hustles and find one that works for you.
- Cut Your Expenses. Cut the cable. Get rid of the home phone. Say bye-bye to Starbucks (at least a few days a week). No more eating out. When examining where your money is spent, you will inevitably discover places for cutbacks.
- Become A Great Employee. You could work yourself into position for a raise or promotion. But you must become more valuable to your employer. Maybe you could get more certifications or training. Always volunteer for the jobs no one else wants and your reputation as a “go-to person’’ will be enhanced. Work on your skills and embrace all technology.
- Create an Emergency Fund. This might be an after-the-fact suggestion, but putting away even $10-$25 a week for rainy-day purposes is a great way to avoid financial emergencies. You know they’re coming. Start your emergency fund now and be ready for them.
- Think about Refinancing. Paying high interest on your debts can be a backbreaker. Check with lenders, especially credit unions, about refinancing. See if you can reduce interest rates and lower monthly payments — a combination that will make paying off all debt faster and easier.
- Other Payoff Possibilities. There are debt-relief programs such as debt management, debt consolidation loans and debt settlement that can help you solve the problem. Make a call to a nonprofit credit counseling agency and let experts walk you through the process to see if this is a faster, cheaper way to get out of debt.
Establishing and Maintaining Credit
Two of the many challenges for low-income families are establishing a solid credit history and maintaining good credit when you do.
Equifax, one of the three major credit bureaus in the U.S., estimated in 2020 that there were 25 million consumers who were “credit invisible.” That means they have not used a credit card or taken out any loans that would tell lenders how good they were at paying things off. Equifax judged another seven million people to be “credit unscorable” meaning they had used so little credit that there wasn’t enough information to give them a credit score.
Lacking a credit history, low-income consumers either won’t get approved for a loan or, if they do, they face much higher costs to use credit to purchase a home, car or any big-ticket item.
Higher-income consumers obviously possess more money, better lifestyles and more luxury items, but they also have more ways to get and keep good credit.
The Consumer Financial Protection Bureau said low-income consumers are 240% more likely to start their credit history with negative records, such as a debt collection. Higher-income consumers start with positive records, such as opening a credit card or getting a co-signer who has good credit.
Experian, another of the Big Three credit agencies, said consumers often begin their credit history with student loans. The amount owed usually peaks at age 34, according to Experian. Unfortunately, student loans usually have a far higher balance owed – average debt was $35,359 in 2020 – making it difficult to pay them off quickly. However, interest rates were so low that borrowers could often refinance to lower interest rates and that helped pay down the debt faster.
Managing Debt Collectors and Scammers
The most helpful government debt relief programs can’t immediately fix your credit issues, especially if your finances put you in the lower end of the low-income household category.
Even your best intentions to pay off debt probably won’t spare you from debt collection, and the scammers it attracts.
You should know your rights with debt collectors and — even more importantly — you should be on high alert to avoid debt settlement and debt elimination scams.
You may not instantly know them when you see them. But there are indicators when a debt relief service is offering you something it can’t deliver:
- Charging fees prior to providing any debt relief service. Sometimes these debt relief services call them “voluntary contributions.” But they’re fees by any other name.
- Claiming “new government programs” that help with personal credit card debt. As we said, these services simply do not exist.
- Guaranteeing they can make unsecured debts disappear or can be paid off for “pennies on the dollar.” You know what they say about something that sounds too good to be true.
- Enrolling you in a debt relief program without reviewing your financial situation. It’s like going in for surgery BEFORE the diagnosis.
- Telling you to ignore or cut off ties with creditors. As much as you’d probably love to do that, such a step comes with serious consequences.
Resources for Low-Income Families
Whether you are retired, underemployed or having a bad run of luck, day-to-day living is challenging at the low-income or poverty level. But there are scores of resources at your disposal.
Financial Aid for Education
Programs that can help include:
- Federal Student Aid — Details the types of grants and scholarships available.
- QuestBridge — Provides information on resources for high-achieving, low-income students, plus resources for educators.
- The Education Trust — Advocates for students with high academic achievement, especially those in low-income situations, and offers a number of tools. Those include help in choosing a college based on performance.
- Bloomberg Philanthropies — Helps high-achieving students who are low- and moderate-income.
- FinAid — Provides information on educational loans, scholarships and military aid, as well as several dozen financial calculators. Gives tips on choosing a college, options for online degrees, jobs and internships and more.
- JKCF — The Jack Kent Cooke Foundation site has scholarship, grant and other info intended for “exceptionally promising” students from low-income families.
Food, Housing and Health Resources
The Covid-19 pandemic underscored the wide-spread need for help in so many areas of people’s lives:
- HealthCare.gov Subsidy Info — This page on the HealthCare.gov site provides an income range table for determining if a household is eligible for lowered health insurance rates.
- AARP Healthcare — The American Association for Retired Persons Healthcare site provides info for low-income healthcare resources such as SHIP (State Health Insurance Program), ECA (Eye Care America), HRSA (Health Resources and Services Administration) and offers a Community Health Center Locator service.
- USDA FNS — The Food and Nutrition Services (FNS) branch of the USDA has a number of food assistance programs including WIC (Women, Infants and Children) and SNAP (Supplemental Nutrition Assistance Plan).
- Medicaid — Medicaid.gov provides all the information you could need regarding Medicaid, CHIP (Children’s Health Insurance Plan) and other health-related programs.
- Food Research and Action Center — FRAC (Food Research and Action Center) publishes information about initiatives, federal food/ nutrition programs, state initiatives and data and publications relating to hunger and poverty.
- NLIHC – Resource Library — The National Low-Income Housing Coalition Resource Library offers publications, tools, research and reports related to advocacy work on housing programs for low-income families.
- HUD.gov Rental Assistance — This page of the U.S. Housing and Urban Development site covers rental assistance and has links to information on rights and responsibilities for tenants, while other pages have information on affordable housing.
- OCC Tax Credit Resources — The U.S Department of the Treasury’s Office of the Comptroller of the Currency site has information on low-income housing tax credit programs plus links to various housing organizations.
- LIHEAP — This page of the U.S. Office of Community Services provides information about LIHEAP (Low Income Home Energy Assistance Program), while the overall site covers other state and community programs to assist low-income families. Also see http://liheap.org/ to learn about the fight to keep LIHEAP funding from declining.
- ShelterListings.org — Provides information by state for finding low-income, low-cost and supportive housing; homeless and day shelters and halfway housing.
- Energy.gov WAP — Has information about assistance for weatherization and energy bills for low-income families.
- LowIncomeHousing.us — Offers a map-based interface to search for affordable housing options across the United States for low-income individuals and families.
- StartSleeping.org – This resource provides listings for shelters, based on your location, helping those who are homeless find a warm, safe place to sleep.
Financial Help for Women and Families
- Child Tax Credit — A direct benefit of the U.S. government’s stimulus program for COVID-19 debt relief. The American Rescue Plan signed into law in March 2021 increased this tax credit from $2,000 to $3,600 for children under six and to $3,000 for children up to 18 years old for families making less than $150,000 per year.
- Single Mother Guide — Lists many resources for single mothers and widows as well as statistics on single parenting.
- NWLC — The National Women’s Law Center monitors laws and policies favoring women and families, and has a Poverty and Income Support section that contains articles and reports about available family support programs, family tax credits and more.
General Financial Assistance
Low-income families face the slimmest margins in making ends meet. Knowing where to look for help is so important:
- Need Help Paying Bills — Provides a wide range of links to state and local assistance programs, debt counseling, charity assistance, health care, etc.
- InterConnection – Low Income Online Store — This page on the InterConnection site (a nonprofit) offers discounted computer equipment for sale for qualified low-income shoppers.
- Benefits.gov — Has by-state links to information about various types of federal benefits, with additional options to search by category or agency.
- USA.gov — The U.S. government provides a long list of assistance programs on this Benefits page, with categories including health and nutrition (SNAP, medicaid, medicare), job and unemployment (EITC, SS, UI, Training), education (loans, school meals) and more.
- Seniors Resource Guide — A listing of federal, state and local options for low- to moderate-income seniors.
- DMV.org – Low-Income Car Insurance — Not associated with the U.S. Department of Motor Vehicles, this site provides information about states that have government-sponsored car insurance for low-income families.
- Frugaling.org – My Low-Income Lifestyle — The frugal living blog Frugaling.org offers a detailed account of how one person copes with living on a low income.
- WiseBread – Top 100 Frugality Blogs — WiseBread, a top personal finance and frugal living blog, offers a useful list of the top 100 frugality blogs and sites based on multiple calculated factors — all of which offer valuable tips on stretching the dollar, saving money and building wealth.
- Welcome to USA — Has information and links to multiple government benefits, including medicare, medicaid, CHIP, SSA, SSI, SNAP, WIC, TANF and more.
- WPFP — The Working Poor Families Project (WPFP) publishes reports and articles about the increasing economic divide in the U.S. as well as links to relevant organizations and resources.
- Ascend — Ascend at The Aspen Institute works towards helping parents and children strive for “educational success and economic security” by highlighting ideas and collaborations in that vein.
- TaxPayerAdvocate.IRS.gov — The Taxpayer Advocate Service site (of the IRS) offers LITC (Low Income Taxpayer Clinic) and eligibility information for low-income taxpayers seeking assistance in resolving tax disputes with the IRS. It has a state map interface for easier search.
- FCC.gov Lifeline — The linked page on the FCC.gov site has info for affordable telephone service options for low-income subscribers under the Lifeline program.
- AARP — The American Association of Retired Persons) Low-Income Assistance page has links to articles on the site about tax help, income assistance and other ways to manage expenses.
Long-Term Debt Relief Solutions
If your debt load is too high for you 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 take a look at your income and expenses, then match you to one of the programs that offers the best solution.
Your 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 monthly payment to the nonprofit credit counseling agency, which then distributes it to the card companies in agreed upon amounts.
- Debt consolidation loan — Consumers take out one large loan and use it to pay off all their creditors. 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.
- Debt settlement — In this program, consumers 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 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.
- Bankruptcy — This is the “nuclear” option when you are so hopelessly behind there is no chance you will pay your bills. The good news is that a successful bankruptcy filing gives you a chance to start all 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 point the way to a clearer path.
Household SizeLow-Income LevelPoverty Level
Household SizeLow-Income LevelPoverty Level
About The Author
Joey Johnston has more than 30 years of experience as a journalist with the Tampa Tribune and St. Petersburg Times. He has won a dozen national writing awards and his work has appeared in the New York Times, Washington Post, Sports Illustrated and People Magazine. He started writing for InCharge Debt Solutions in 2016.
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