A record number of consumers entered debt consolidation in the first half of this year, with an average balance of about $40,000, according to one of the nation’s largest debt-management nonprofits.
Almost 15,000 new clients entered debt-management plans with Money Management International in the first six months. That is the largest year-to-date figure in a dataset that dates back to 2017.
The nonprofit delivered financial counseling sessions to more than 40,000 households in those months. The tally of counseling sessions increased for five consecutive years and is up 143% since 2021.
Household debt nationwide totals $18.8 trillion, the highest number on record, according to the Federal Reserve Bank of New York.
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Debt-collection lawsuits spiked in recent years, according to The Pew Charitable Trusts.
Meanwhile, the personal saving rate stands at just 2.7%, federal data shows, the lowest rate since the 2022 inflation crisis.
Struggling economy
Consumer prices are up by about 27% since the start of 2021, according to the Consumer Price Index.
“In a word, I would attribute a lot of this to inflation,” said Ted Rossman, principal consumer finance analyst at MMI.
Miriam Perez of Syracuse, New York, got her real estate business back on track with help from the nonprofit debt consolidation firm Money Management International.
Miriam Perez, 59, of Syracuse, N.Y., remembers a big bag of salmon cost $23.99 at her local Costco. “Now, it’s somewhere between $40.99 and $42.99,” she said. “And I’m talking about in a span of a year or a year and a half.”
Her real estate business stalled during the COVID-19 pandemic, leaving her with more than $100,000 in credit card debt. At the pandemic’s peak, she lost $10,000 to $15,000 a month. Her savings were exhausted.
“I felt like I was drowning financially,” Perez said.
She entered debt consolidation with MMI in late 2022.
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Pros and cons of consolidation
Debt consolidation typically bundles multiple consumer debts into a single debt with one monthly payment. Debt counselors negotiate lower interest rates on credit cards and other loans, so the client can pay down the balance more quickly.
The downsides? The single monthly payment can be steep: Perez paid more than $2,000 a month. One also doesn’t get to use the credit cards anymore.
But debt consolidation can get one out of debt quickly; Perez paid off her debt in about 3½ years, making the final payment this year.
She got her business back on track and, every time she flipped a house, she’d make a large extra payment on the balance she owed. Last month, she bought a new car.
When Perez entered debt consolidation, she said, “It just felt like I exhaled for the first time in a while.”
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Burden on youth
Runaway debt hits young Americans especially hard. Gen Z adults, ages 18 to 29, are the fastest-growing segment of MMI clients, with a 35% increase over the past year.
Millennials, ages 30 to 45, make up the largest share of MMI clients, 56%. They have an average of $43,533 in unsecured debt.
Gen X, ages 46 to 61, make up a smaller share of MMI clients but have the most debt, $53,350 on average.
The culprit is often credit cards. The average credit card has an interest rate of about 21%, as of May, making it one of the costliest forms of credit.
About 13% of the nation’s card balance was at least 90 days delinquent in the first quarter of this year, according to a report from the New York Fed. That figure hasn’t ranged so high since 2011, when the nation was recovering from the 2008 financial crisis.
Can a loan help?
To consolidate credit card debt on their own, many Americans turn to personal loans. Those are typically installment loans with a fixed interest rate and monthly payments. Competitive rates might start at about 7%.
The share of American consumers with personal loans rose from 31% in 2017 to 38% in 2025, according to a February report from Experian.
However, MMI reports, the personal loan approach often doesn’t work. Almost half of new MMI clients hold personal loans, with an average balance of nearly $19,000.
“A lot of the do-it-yourselfers are ending up needing additional help,” Rossman said. “They end up running the credit cards back up, and they’re just moving money around.”
Another tool
Experts recommend another powerful tool for paying off credit card debt: the zero-APR credit card.
A consumer can make purchases with the card and pay no interest for a promotional period of 12, 18 or even 24 months. When the promotion ends, interest kicks in — but only on the debt that remains on the card.
Zero-interest cards can be a great tool, Rossman said, for a borrower with relatively good credit and no more than $5,000 or $6,000 in debt.
Cardholders with weaker credit or higher balances, he said, should consider a credit counseling service.
The nonprofit National Foundation for Credit Counseling serves as a clearinghouse of trusted credit counseling agencies.
