How to Get Out of Debt on a Low Income

Like so many failed New Year’s resolutions, simply wishing debt away without committing to a solid plan is a losing proposition.

For low-income families who worry how they will pay monthly bills like rent and utilities, let alone manage overweight credit cards, carrying any amount of debt can be especially daunting.

While there’s no debt equivalent of Ozempic, 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 qualifying as “low income” is only one of many challenges faced in managing rising inflation and increasingly expensive health care costs.

Whatever the statistical thresholds used to define income levels, the reality for too many Americans is a paycheck-to-paycheck existence, with little attention given to planning for retirement, college funds, savings or any other long-term financial goal.

“Low income” is a technical term when it comes to federal government debt relief programs available to consumers. Those 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).

Qualifying as poverty-level for SNAP, for instance, means your household gross income must be at or below 130% of the Federal Poverty Level (FPL.) Specific dollar amounts vary by household size.

Low-Income vs. Poverty-Level

The difference between “low income” and “poverty” can be a critical factor 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.

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%.

Based on 2025 numbers and projections for 2026, the federal poverty guideline for a one-person household in the 48 contiguous states will be approximately $15,650; a low-income one-person household would then be approximately $23,475.

The U.S. Department of Health and Human Services (HHS) issues the poverty guidelines yearly, based on income and size of household. The charts below show the 2025 numbers, as well as the resulting low-income household guidelines, in the 48 contiguous states.

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 $5,500 for each person for Poverty Guidelines, and $8,250 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 $6,880 for each person for Poverty Guidelines, and $10,320 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 $6,330 for each person for Poverty Guidelines, and $13,938 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 your type of debt.

The income figures in the above charts are reliant on poverty guidelines determined by the U.S. Census Bureau and updated yearly – usually in January or February – 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.

Fortunately, there is no shortage of help on other fronts when it comes to low-income debt help.

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 are available at the state level through each state’s health and human services department. Local town or city governments in some states also have resources or information for things such as paying emergency energy bills or finding a break on property taxes for people in a financial crisis.

One qualifying standard has nothing to do with net or gross income. Most government assistance programs are only available to American citizens or legal permanent U.S. residents. Undocumented immigrants typically cannot access these government programs.

How to Pay Off Debt with Low Income

Low income people don’t have a lot of wiggle room to pay anything except bills. But with smarter budgeting and a better understanding of debt-relief options people can establish financial goals that can provide targeted solutions to getting out of debt with low income.

Free nonprofit credit counseling can provide that help and be an important first step in a systematic plan to reduce debt for people with low incomes. A thorough examination of your personal situation with an experienced certified counselor can lead directly to transformative change on a number of fronts.

» Learn More: How to Pay Off Debt on a Fixed Income

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

1. Don’t add new debt: Stop using credit cards where possible, and don’t open new ones. Especially avoid the trap of payday loans.
2. Chart your spending: For 30 days, track 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 use cash, keep your receipts, use an app, or write it down in a notebook. You’ll be surprised how you can trim your monthly spending.
3. Tally your credit card debt: It’s human nature to try to ignore how much debt you’re in, but knowledge is power. Seeing what it costs each month is the first step toward eliminating credit card debt. 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 are easy using a credit card calculator.
4. Make a budget: Keep track of how much money comes in, what necessary bills cost (housing, utilities, car, credit card payments), then see 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.

Additional Tips for Low-Income Debt Relief

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

• Debt Snowball: Target 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: Use a garage sale, eBay, Craigslist or Facebook Marketplace to 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 income and that works with your life, resources, and schedule.
• Cut Expenses: Cut the cable, get rid of those streaming subscriptions, cut down on 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. Commit to it.
• Create an Emergency Fund: Putting away even $10-$25 a week for rainy-day purposes can help 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 – most importantly – pay off the balance monthly.

Managing Debt Collectors and Scammers

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

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 once the debt is verified to your satisfaction. End of discussion.

However, no matter what you owe, you have rights. The collection agency may not harass, threaten, or bully you into paying.

Be proactive when possible. Avoid debt collection by contacting the original lender and trying to work out a payment plan.

If you owe multiple creditors and can’t see your way free of debt, consider a Debt Management Plan where a certified credit counseling agency negotiates a lower interest rate with your creditors. You make one monthly payment to the agency which then pays your creditors.

A reminder: Ignoring creditors can damage a credit score. Instead, recognize there are ways to stop collection calls and work out a way to repay your debt.

“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.”

So will knowing your rights. The Fair Debt Collection Practices Act (FDCPA) sets rules for debt collectors, including:

• How often and when they can call
• That they refrain from abuse or deception
• That they provide the amount of the debt and identify the current creditor, and how to get the name of original creditor.

The Federal Trade Commission has more information.

There are also strict rules for debt settlement companies. Be vigilant. If they do any of the following, 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 – for those who qualify. While there are no government debt relief grants, there is grant money to pay other bills, which should lead to paying off debt by freeing 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.

Just 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

There is a wide spectrum of resources to help people with food, housing and healthcare challenges. They range from federal programs to state offices to local county or community organizations. Search your state or county websites for resources, including health clinics and food banks.

Websites like www.rxassist.org and www.webmd.com offer guidance for acquiring free or reduced-cost medications to qualifying individuals.

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
• ShelterListing.org (state links to homeless shelters)

» Learn More: Help with Rent Payments

Utilities Bill Assistance

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 double 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 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 administered 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 black and African Americans. Financial aid for disabled persons also comes from unique sources.

Empowering Financial Knowledge: Workshops, Seminars, and Resources

Financial literacy can be improved in a number of ways. Even if you have some background thanks to your parents, your schooling or your other experience, it can’t hurt to expand your knowledge and learn some helpful strategies:

1. The federal government’s resources are subject to change or even elimination, but the government still provides a good place to start. Check MyMoney for an array of information and ideas. Another good starting point is this directory for financial guidance.
2. For ideas to improve financial literacy, there are published guides that can be of help. Check here or there and find the area you want to research.
3. Commercial services may be looking to engage you as a customer, but their websites often provide smart advice that’s worth checking out. You can decide whether to use the company after learning the ropes and assessing the company’s products.
4. There are tools available to help you with budgeting and managing your finances.
5. There are local organizations that provide help with financial literacy. With the Internet, the word “local” takes on a different meaning. Consider a national program that you can access from your home computer.

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 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 and is an especially attractive option for those trying to get out of debt with bad credit.

Debt Consolidation Loan — Consumers can take out a loan to pay off their credit cards but you’ll need a good credit score to qualify.

For-Profit Debt Settlement — Consumers, or for-profit companies, make a lump-sum offer to the credit card company in a process that involves a lot of negotiations and may end up costing more than what you owe.

Credit Card Debt Forgiveness — Offered by a few nonprofit credit counseling agencies, including InCharge Debt Solutions, credit card companies settle for a set percentage of what you owe payable in 36 fixed payments.

Bankruptcy — An option for when you are so hopelessly behind there is no chance you will pay your bills in five years or less.

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.

If that describes you, just know that you’re not alone. According to the Consumer Financial Protection Bureau, total U.S. household debt reached a new record high in the third quarter of 2025 due to increases in mortgages, car loans and credit cards.

There’s no easy road to relieve the financial stress for low income Americans in debt but nonprofit credit counseling can help find the best debt consolidation program for you.