Is there a federal government debt consolidation loan program available in the US?
Most people will tell you that there is not a government debt consolidation program in the USA. There are consolidation programs available for student loans and in some cases there may be debt consolidation loans available to help corporations out of debt when it is in the interest of the government to do so. Other than those, it doesn’t appear that the federal government offers any type of consolidation services.
Government debt consolidation often has some of the lowest interest rates you can possibly get. The government doesn’t want the hassle of keeping track of payments on millions of educational debt consolidation loans so they let local banks handle it. The government debt consolidation loan program then guarantees the loans. So if you stop making your payments, the bank can get their money back from the government. Obviously this minimizes the amount of risk the bank incurs because they can rely on the government if an individual dies or stops making payments on their loan.
Because of the this US Government backing, educational loans that have been consolidated in this manner are usually some of the last debt you want to pay off. The interest rate is usually well below what you’d pay on your house or car, so it costs you the very least possible. The idea is that the government wants to encourage people to go to college by making it easy to pay for your education over time. Unfortunately this sometimes leads to poor financial decisions since people don’t have to think about the cost benefit of a given course of study–they can just pay for it over time. The government doesn’t only issue loans for people studying fields where they are likely to get a job–they will help consolidate your loan to study underwater basket weaving if you decide that is what you want to study.
If you need a debt consolidation loan, starting with your local bank is probably a good idea. They will have the experience to point you to a good reputable company or they may be able to help fund the loan themselves through a federally sponsored program.
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