Would you feel more confident if a debt consolidation program were government approved? The federal government does provide a listing of accredited credit counseling agencies charged to help consumers file bankruptcy. Likewise, former students can combine education loans through a sanctioned program.

However, consumers must fend for themselves when dealing with most private debt consolidation programs. Can you trust them without a government stamp of approval? Do you trust yourself?

  1. Pros and cons of using private lenders
  2. Approved credit counseling programs
  3. Consolidating student loan debt

Government Permitted Loan Consolidation Programs

The federal government permits private banks and lenders to extend debt consolidation loans to borrowers they deem qualified – subject to existing banking and lending laws. In this context, permit means the government does not prevent companies from lending money for this purpose as long as they do not break any other laws.

Do not confuse “permit” with a stamp of approval indicating the lender meets certain stringent qualifying criteria for a specific program. Nothing like this actually exists for the majority of private offerings. You must weigh the pros and cons for yourself, and read the fine print on your contract.

Do You Qualify For Debt Relief?


Restructuring existing debt by combining your existing accounts one can provide several immediate advantages for consumers.

  1. Improve your credit score by paying off any currently delinquent accounts.
  2. Lower your interest rates by paying down the balances on high-interest credit cards.
  3. Lower your monthly payments by spreading repayment over a longer period.

Request a consolidation loan to centralize your debts into one account and give yourself some breathing room.


Restructuring your existing debt with a consolidation loan does not make the problem go away. It could open the door to further trouble. Proceed with caution, and do you homework. Three areas trip up many consumers.

  1. Spreading your payments over time translates into higher overall interest charges.
  2. Many people accumulate new credit card debt, doubling their burden.
  3. Origination fees add to upfront costs and raise the effective interest rates.

Government Approved Credit Counseling Services

Except for a very narrow set of student loan debt, there is no such thing as a government approved debt consolidation program. However, as required by the US Code of Federal Regulations, the Department of Justice provides a state-by-state listing of sanctioned credit counseling agencies.

These approved agencies provide two forms of required education programs for consumers seeking debt relief through the legal system. Borrowers in Alabama and North Carolina do not fall under their jurisdiction and should contact the administration in their district.

Most of these agencies do not provide debt consolidation programs but may refer you to qualified bankruptcy attorneys.

Alternative To Bankruptcy

Pre-Bankruptcy Counseling

The federal government approved and required pre-bankruptcy counseling education program includes an evaluation of your financial situation, discussion of alternatives, and a personal budgeting plan.

The course is required and costs approximately $50 for most consumers. You can complete the course online, over the phone, or in person. Upon completion of the course, the organization must provide you with a certificate of completion.

Post-Filing Debtor Education

The government approved providers also offer post-filing debtor education programs, which consumers are also required to complete prior to discharge. The course covers developing and meeting a budget, managing finances, borrowing money wisely.

Government Approved Student Loan Consolidation Program

The one and only truly government approved debt consolidation program pertains to specific forms of student loans. Those originated through private banks do not participate, and you should not confuse the two together. One example is federal government sponsored and ratified while not all others are.

Permitted Loan Types

The federal government allows borrowers to combine education loans together into a single monthly payment. Only certain types qualify for this program.

  • Direct PLUS
  • Direct Subsidized
  • Direct Unsubsidized
  • Federal Nursing
  • Federal Perkins
  • Health Education Assistance
  • PLUS loans from (FFEL)
  • Subsidized Federal Stafford
  • Supplemental Loans for Students (SLS)
  • Unsubsidized Federal Stafford

Pros and Cons

Make certain that you fully understand the advantages and disadvantages of consolidating your education loan. While this is a federal government approved program, combining accounts together is not always the right choice for every consumer.

Doing so sometimes means one single monthly payment, and may lower the monthly payment by extending the repayment terms. However, longer repayment terms may also mean higher overall interest costs. In addition, you may lose any special borrower benefits when you close the existing accounts.