The state of Kentucky has taken a huge step in helping its residents by giving $2.5 million to a nonprofit that buys and cancels medical debt. This means that around 130,000 people will have a total of $250 million in debt wiped out, and the best part is that they don’t have to do anything to receive this relief. The nonprofit, called Undue Medical Debt, buys medical debt from hospitals and collection agencies at a low price, and then cancels it instead of trying to collect it.
The first wave of letters went out to 46,000 people, informing them that $100 million of their debt had been cancelled. The letters are straightforward, stating that the debt has been wiped out and there’s nothing for the recipient to do or send back. This is a huge deal, especially since medical debt can have a significant impact on a person’s credit score – as little as $500 in debt can lower a credit score by 20 to 60 points, making it harder to get a mortgage or car loan.
The $2.5 million used to fund this program comes from the state’s housing funds, which might seem counterintuitive since medical debt can make it harder for people to buy homes. However, the governor believes that relieving medical debt is the right thing to do to help Kentuckians who are overwhelmed by these costs. The nonprofit has already cancelled over $49 billion in debt across the country, and this program is expected to continue over the coming months until the $250 million is spent.