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.

Once the diagnosis is made, the remedy can come in many forms, though grants, educational and support resources, strengthening credit and Debt programs.

Carrying debt can be challenging for anyone, but it’s especially daunting for low-income families.

People in low-income households worry daily about how they’ll pay the bills monthly bills, as well as the things that come up unexpectedly, and even that week’s groceries or gas for the car It’s a paycheck-to-paycheck existence without much planning for retirement, college funds, savings account, or any other long-term financial goal.

It’s an about survival, but that doesn’t mean that ever-increasing debt, especially credit card debt, has to be the result.

What Is Considered Low Income?

If you’re one of the millions of Americans struggling to get ahead, you may feel like “low income” is an understatement, considering the challenges you face. The term is a technical one when it comes to the federal government Debt programs available to consumers. The programs use a formula to define low-income households, as opposed to “poverty-level households.”

The difference between the two can be the difference when it comes to getting 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.

A low-income household is one whose taxable income for the year before was not more than 150% higher than the poverty guidelines.

In 2022, the federal poverty guideline for a one-person household in the 48 contiguous states was $13,590; so that means a low-income one-person household would make $20,385. Alaska and Hawaii have separate, higher, guidelines because of a higher cost of living 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 2022, 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

Household size/poverty guideline/low-income guideline

For families/households with more than 8 persons, add $4,720 for each additional person for the poverty guideline and $7,080 for the low-income guideline

Alaska Low Income and Poverty Line Criteria

Household size/poverty guideline/low-income guideline

Hawaii Low Income and Poverty Line Criteria

Household size/poverty guideline/low-income guideline

For families/households with more than 8 persons, add $5,430 for each additional person for the poverty guideline; add $8,145 for the low-income guidelines.

Do I Qualify for Low Income Government Assistance?

The short answer: that depends.

The income figures in the above charts are based 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 American, regardless of income – you won’t find any government Debt programs.

The good news is, there is no shortage of help on other fronts. Federal government Debt programs in the form of financial help include long-time programs such as Supplemental Nutrition Assistance Program (SNAP, formerly known as Food Stamps), Temporary Assistance for Needy Families (TANF), Medicaid, Children’s Health Insurance Program (CHIP), unemployment benefits and more.

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

If your family is designated as low-income, you may qualify for HUD’s public housing program, administered through state housing authorities or agencies. To qualify for housing help, you must earn 80% or less of the median household income level for your county or city (your state housing authority will have charts on its website showing what the amounts are). If your household earns 50% of that median income level, you meet HUD’s lowest, low-income limit.

There is an application process for HUD benefits and housing programs, which includes proof of income. Your state’s human services department will have information on its webpage about how to apply.

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.

Since the COVID-19 pandemic, more focus is given to Americans with low incomes and in poverty who have trouble making ends meet, which means resources and information is becoming easier to find.

The number of people in poverty in the U.S. is creeping up after a four-year decline. The 2020 U.S. census reported there were 37.2 million people in poverty, up 3.3 million from 2019. COVID-19 relief, particularly cash payments for families with children, temporarily brought families out of poverty in late 2020 and 2021, many studies showed, but in 2022 indicators were that the poverty level was on the rise.

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 grants, there is free money to pay off debt in that it will help you pay bills, giving you more income to pay on credit card and other debt.

The biggest grant the government offers may be housing vouchers for those who qualify. The local housing authority pays your 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 and legitimate Debt 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 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

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 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.

Legal Help

• 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

How to Pay Off Debt with Low Income

If you have a low income, you don’t have a lot of wiggle room to pay for anything but bills. But with some hard work, you can maximize your money by setting and tracking financial goals.

The first step is to decide what debt-relief option to choose. What are your goals? What resources can you tap? What percentage of your budget do you allot for housing? For food? Utilities? Transportation?

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

Take these steps to gain control of your debt:

1. Chart your spending: Keep track of how much you spend and where it goes for 30 days. Online banking makes this easy. It’s all right there in your statement if you use a debit card, rather than cash. If you 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.
2. 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.
3. Make a budget: It doesn’t have to be complicated or scary. A budget is keeping track of how much money you have coming in every month, what your necessary bills are (housing, utilities, car, credit card payments), then what you have left over and where that’s going. Your budget should be something you frequently look at and adjust and make sure you’re sticking to it.
4. Stop growing debt: Stop using credit cards where at all possible, and don’t open new ones.
5. Stay positive: Even if your budget strays off course now and then, this is a key factor in success.

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

Debt Snowball: Pay off your smallest debt first, regardless of the interest rate. Financial experts, like Dave Ramsey, who made this method popular, say that momentum (the snowball effect) can motivate you to keep paying off debt.

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.

Earn Extra Income: Bringing in an extra $50 or $100 a week will help you pay down debt much faster. Look into becoming an Uber driver or Amazon flex delivery person. Work one night 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, your resources, and your schedule so it doesn’t cost you money.

Cut Your Expenses: Cut the cable, get rid of those streaming subscriptions, cut down on the Starbucks trips or eating out. Since you kept track of 30 days of spending, you already know where the places to cut are, so now’s 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 that can bust a budget.

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 or consider some form of debt consolidation.

Look into Debt: Debt management, debt consolidation loans and Debt can eliminate credit card debt. Call a nonprofit credit counseling agency, like One Vision International Solutions, 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

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 the balance monthly.

Managing Debt Collectors and Scammers

People with debt and little money are prime targets for scammers.

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 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.”

Long-Term Debt 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 One Vision International 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 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 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 — 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 is that there are no negotiations. Credits settle for 50%-60% of what you owe in 36 fixed 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 One Vision International 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 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 you find the best debt consolidation program for you.