1-05-2026 12:30pm

New Jersey’s Latest Medical Debt Relief Round Erases $86 Million for 53,000 Residents

NJ’s latest medical-debt relief erases $86M for 53,000 residents, nearing $1.4B total; research finds relief eases strain, with mixed credit/health gains.

The Murphy administration says the state’s partnership with Undue Medical Debt is nearing $1.4 billion in abolished medical bills, as research shows household debt relief can reduce immediate financial pressure but doesn’t always translate into broad credit or health gains.

NEW JERSEY — New Jersey residents across the state, including in Morris County, may soon receive letters notifying them that old medical bills have been eliminated, after Gov. Phil Murphy’s administration announced a sixth round of medical debt relief that will erase more than $86 million in medical debt for over 53,000 people. The state said Undue-branded letters to affected residents began arriving starting Dec. 27, 2025, and recipients do not need to apply or take action.

State officials describe the initiative as a targeted way to reduce financial strain from unpayable medical bills. Research on debt relief suggests the biggest near-term effects often involve easing collection pressure and correcting credit-file damage. However, average improvements in broader financial or health outcomes can be limited depending on when relief arrives and whether the debt was affecting credit in the first place.

How the relief works, and who qualifies

According to the governor’s office, New Jersey used about $600,000 in American Rescue Plan (ARPA) funds for this round, which Undue Medical Debt used to purchase bundled portfolios of past-due medical debt from participating providers or secondary-market partners. Undue then abolishes the debt rather than collecting it.

The state says eligibility is limited to people who meet one of two criteria:

Household income at or below 400% of the federal poverty level, or
Medical debt that equals 5% or more of annual income.

There is no application process, and the relief is source-based—meaning it depends on which hospitals, health systems, or debt holders choose to sell qualifying accounts. Residents cannot request that Undue buy a particular bill.

Program scale in New Jersey

With this sixth round, the administration says New Jersey’s partnership with Undue has abolished nearly $1.4 billion in medical debt for more than 828,000 residents since the program’s first wave, which state and media accounts have dated to August 2024.

Related state protections: credit reporting and collections rules

The Governor pointed to the Louisa Carman Medical Debt Relief Act, signed July 22, 2024, which placed limits on medical debt credit reporting and other collection practices.

“We honor Louisa by carrying forward her mission to ensure every New Jerseyan can access the health care they deserve without breaking the bank,” said Governor Murphy. “The Louisa Carman Medical Debt Relief Act is a monumental step toward building a health care system that is more affordable and more accessible for families all across New Jersey. And it will always stand as a testament to the indispensable role Louisa played in transforming our health care system for the better, so we can protect all of our neighbors from being forced to choose between seeking potentially life-saving care or falling into a medical debt trap.”

Nationally, the treatment of medical debt in credit reporting has been in flux. The CFPB finalized a rule in January 2025 intended to remove medical bills from credit reports used by lenders, but major news outlets reported that a federal judge later overturned that federal rule in 2025, leaving credit reporting practices and related legal questions to continue evolving.

What research says about medical debt—and what relief can (and can’t) do

Medical debt remains widespread in the U.S. A KFF analysis of federal survey data estimated Americans owe at least $220 billion in medical debt, with millions owing more than $1,000, and some owing far more.

Studies and policy analyses often link medical debt to financial strain that shows up as late payments, collection activity, or difficult household tradeoffs. But the effect of forgiving debt that is already in collections can be smaller than many assume—particularly if the debt was not appearing on credit files or if the relief arrives long after the medical event.

A 2025 paper in The Quarterly Journal of Economics examining two randomized evaluations of medical debt relief found modest improvements in credit access only when there was “counterfactual credit reporting,” and no impact on credit report outcomes when there wasn’t; it also found a reduction in repayments of existing medical bills and no detectable effects on survey measures such as mental/physical health or health care use in the studied settings.
Related works from Stanford’s SIEPR and J-PAL similarly report that, on average, downstream forgiveness of collections-held medical debt did not consistently improve measured financial or health outcomes, while still changing payment behavior by reducing what people paid on those medical bills.

Economists generally expect household debt relief to matter most when it changes credit constraints or frees up cash flow for other spending. In the medical-debt context, the clearest economy-wide channel is often credit-market functioning—especially for mortgages.

The CFPB has argued that medical debt is a poor predictor of whether someone will repay a loan and estimated that removing medical bills from credit reports could raise credit scores by about 20 points on average for affected consumers and lead to roughly 22,000 additional mortgage approvals per year (in the CFPB’s projection for its now-contested federal rule).
A CFPB “data spotlight” on the early impacts of removing low-balance medical collections from credit reports found credit scores improved, but the bureau reported no clear increase in access to more credit in the early data, suggesting that score changes do not always immediately translate into new borrowing.

Medical debt relief purchased “for pennies on the dollar” typically involves accounts considered difficult to collect, which can limit the direct financial effect on hospitals. Still, hospitals nationwide report large volumes of uncompensated care and bad debt, which can influence pricing, staffing, and finances, factors that sit in the background of any medical-debt policy debate.

What to know if you receive a letter

State officials say recipients will be notified by mail with an Undue-branded letter, and there is no application and no action required. Residents who receive unexpected calls, texts, or emails requesting payment or personal information related to this relief may want to proceed cautiously and verify the communication through official channels.

Medical debt relief is a Band-Aid, necessary but insufficient to solve the healthcare crisis. But there is a solution: How to Fix U.S. Health Care Costs (Without Breaking What Works)