How Does Debt Relief Work?

One thing that needs to be made clear from the onset is that the government does not pay or forgive individual debt but it has made policy changes and enacted laws to help people get out of their debts. The government has increased funding for education grants to help people get higher education, they have made changes to the federal tax tables to enable people take home larger pay checks and the government has also enacted laws to assist people struggling with credit card debt.

Education Grants

The administration realized the importance of education in securing gainful employment and also the fact that students from low income families find student loan options not viable. The debt relief program has increased the funding for education grants by 40 billion dollars and it is something that the general population would benefit from in the long run.

Colleges and institutes also stand to benefit from this new policy as they are in line to receive funding for upgrading facilities, hiring capable teaching staff and including industry certified courses that will prepare students for employment opportunities after their education. Historically Black Colleges and Universities (HBCU's), and colleges that serve students from low income families will benefit from this government program.

Credit Card Act

The government enacted the Credit Card Accountability Responsibility and Disclosure Act of 2009 to curb the spiraling debts. Under this act, the government intends to put an end to unfair practices used by credit card companies to make a profit. Putting a check on companies that arbitrarily change interest rates, the new act stipulates that companies need to notify the client at least 45 days in advance before changing the rates.

Card companies will have to mail the billing statement to clients at least 21 days in advance instead of 14 days. This will allow the customer more time to respond; companies are also required to have a fixed due date and if that falls on a weekend or holiday they will consider the next working day as the due date. Card companies are also required to have their terms and contracts online for government scrutiny and the act also stipulates the size of the font that needs to be used for the contract. The credit card act also stipulates that companies clearly define terms like 'fixed rate' and 'prime rate' and do away with 'double cycle billing' practices.

Tax Reforms

Several changes were made to the federal tax tables that will now enable hard-working Americans take home larger salary checks so that they find it easier to pay off their debts. One of the tax reforms comes in the form of 'Making Work Pay', under this reform individuals can get tax credit up to $400 and married couples can get up to $800. Individuals who purchased vehicles worth up to $49,500 in the year 2009 can deduct state sales tax or applicable fees in states which don't have sales tax.

Homeowners can also claim up to $8,000 as a tax refund if they have entered in to a contract on or before April 30. Under the American Recovery and Reinvestment Act of 2009, tax credits were also initiated for home energy efficiency and renewable energy incentives. Transportation subsidies and tax-free employment benefits were also introduced to help people suffering from the ailing economy. Details about tax reforms and changes can be found in detail on the IRS website.

The debt relief program is aimed at cushioning the downward spiral of the economy and strengthening it by an increase in government spending. The administration has promised 747 billion dollars, over a period of ten years, under the American Recovery and Reinvestment Act of 2009 to help the country tide over this economic crisis.