Firstly I am very lucky in that I hardly if ever forget words. (That was fatal, I've got a gig tomorrow night). The reason for this is the fact that I quite accidentally trained my memory when very young in the classic 'memory man' way, i.e. taking a journey. My 'journey' aged 8 years old and with a poem to learn for school, involved walking round a carpet in my bedroom, and each corner represented a verse, then going accross the carpet was the next verse etc. etc.
Now I doubt weather walking the floor in a folk club is acceptable, but giving yourself landmarks i.e 'then he marries her'...'then she leaves him'...then they are reunited' etc. in a song might help.

Secondly most Traditional singers including my wife, have a family Songbook. All songs numbered and in the best handwriting, and kept with pride.
This is no more than a treasury, and a reference if memory does fail. My wife has her book in her hand and sings with her eyes shut!
On the other hand there are too many people singing for the wrong reason. One simple question sorts it out.
Why are you singing in the first place. (I want to do it for me, and play my guitar Wrong answer..not a crime just the wrong answer)
Why are you singing? (Because I want you to love this song as much as me! You are on your way to becoming a singer, who cares if you need the words or not! You have opened your heart...the rest will follow.

Here endeth the lesson...