An Austin church's $75,000 gift erased $14 million in medical debt

This week, 10,865 people are getting letters telling them that medical debt they owed has been paid off, the Austin American-Statesman reported on Friday, October 9. A $75,000 donation from Covenant Presbyterian Church helped erase $14 million in debt through the national nonprofit Undue Medical Debt. The recipients do not have to do anything.

The church ended last year with a $200,000 surplus in its $5.47 million budget, which already set aside $1.1 million for charity work, according to the Statesman. The elders handed the surplus to the church's Mission Committee to spend on community giving. The committee worked with Undue to find the greatest need in Travis County, and Undue narrowed the pool to people living in the 78753 ZIP code.

How the debt gets bought

Undue buys medical debt in bulk from hospitals, practice groups, ambulance companies and collection services for pennies on the dollar, president and CEO Allison Sesso told the Statesman. The debt is usually one to seven years old, and on average every $1 clears about $100 of debt, she said.

Undue pays off debt only for people earning less than 400% of the federal poverty level, or for people above that line whose debt equals 5% or more of their income, the Statesman reported. Church communities and other groups that put together fundraising campaigns are how Undue gets its funding, the paper said.

The same model is at work elsewhere. In Kansas, the Somos Votantes Education Fund announced a second wave of relief with Undue on Monday, October 5, and KSNT reported that the two groups have helped almost 27,000 Kansans. There is no application process, and notification letters begin going out the week of October 19.

Where the rest went

Covenant split the rest of its surplus among three nonprofits. Foundation Communities received $75,000, expected to provide housing stability for about 100 people. St. Vincent DePaul received $25,000 for its mini-loan program, which helps people turn unaffordable payday loans into affordable financing, and Texas RioGrande Legal Aid received $25,000 to help people get identification documents.

It is the church's second gift to Undue. In 2020, it gave $100,000 to remove $16 million of medical debt across a much broader area of Central Texas, according to the Statesman.

"The point is not to get the pat on the back and feel good about ourselves," said Whitney Bell, the church's mission director.

For donors and for people with medical bills

In our view, a budget surplus is one of the easiest moments for a congregation or small foundation to try a gift like this, because the money is not already promised to a program. Ask the partner how it chooses whose debt to buy and how recipients will be told. People who still owe medical bills have options of their own, which the Statesman listed.

1. Check the bill. Confirm that you received the services you were charged for.
2. Ask about charity care. Hospitals post their charity care applications and billing policies on their websites.
3. Set up a payment plan. Avoid moving medical debt to a credit card or a loan, where interest makes it harder to pay off.