The Growing Debt Crisis: Why More Americans Are Struggling to Stay Afloat
A rising tide of financial stress is sweeping across the United States, leaving many families grappling with debt and uncertainty. The struggle to pay bills is no longer a distant worry, but a daily reality for a significant portion of the population.
The Weight of Credit Card Debt
Many families rely on credit cards to bridge the gap between income and expenses, but this often leads to accumulating balances they can’t repay. Nearly half (47 percent) of all cardholders carry debt from month to month, facing an average interest rate of almost 20 percent. Worryingly, about one in five (22 percent) of those with credit card debt believe they will never pay it off.
The Emotional Toll of Financial Strain
The National Foundation for Credit Counseling (NFCC) has observed a concerning trend: debt is becoming a pervasive source of anxiety and despair. According to an NFCC survey, a growing number of consumers are missing payments, dipping into savings, or shifting balances to lower interest rates just to keep up. Two-thirds of survey respondents reported that being in debt hinders their ability to make sound decisions in other areas of their lives, creating a constant feeling of financial treading water.
Success Stories: Finding a Path to Debt Freedom
Despite the challenges, escaping debt is possible. Here are two stories illustrating the power of seeking facilitate and adopting a disciplined approach.
Jeanine Kosinski: Rebuilding After a Setback
Jeanine Kosinski, a language educator and dog trainer in San Francisco, found herself with $35,000 in credit card debt, a mortgage and student loans after a traumatic event led to unemployment and hospitalization. Overwhelmed and ashamed, she initially hid her situation from friends and family. She ultimately sought help from a nonprofit credit counselor, avoiding debt-relief companies that promised quick fixes. With guidance from American Consumer Credit Counseling and a commitment to reducing spending, she became debt-free in less than a year.
“You can do this,” Kosinski advises. “But you can’t do it without help. Call these guys. They will be kind to you. They will help you learn about your money and rebuild your relationship with your creditors. And then you can be free.”
Tiana Moore: A Nurse’s Journey to Financial Stability
Tiana Moore, an operating room nurse in Fresh Britain, Connecticut, faced job loss during 2019 and a furlough during the pandemic. Saddled with $21,000 in credit card debt, she chose to tackle it head-on rather than declare bankruptcy. She connected with Money Management International (MMI) through her bank. A counselor reviewed her expenses and crafted a personalized plan. MMI negotiated a zero percent interest rate on her cards, down from 29 percent, and Moore sent a single payment each month.
After four years, Moore was debt-free, having saved an estimated $54,000 compared to making only minimum payments. She now prioritizes frugality, budgeting, and saving.
“I feel amazing,” Moore said. “It’s great to know that now I can invest in my future and my children’s future.”
What Do Nonprofit Credit Counselors Do?
Trained credit counselors at a nonprofit agency review your financial situation and offer a range of options, from self-help steps to debt management plans. According to Bruce McClary of the NFCC, a professional can provide an objective perspective and identify solutions you might not have considered. They can assist with credit card debt, medical debt, student loans, and even rent payments, with specialized programs for service members and veterans.
Unlike for-profit companies, nonprofit counselors focus on structured repayment plans negotiated with creditors, rather than offering refinancing or consolidation loans. They can often secure lower interest rates and eliminate fees.
Beware of Predatory Debt Relief Companies
Consumer advocates warn against the risks of for-profit debt relief companies that promise quick fixes. These companies often advise clients to stop making payments to creditors, leading to damaged credit, late fees, and potential lawsuits. The Better Business Bureau (BBB) received over 11,000 complaints about these companies between 2020 and June 2023, citing misleading claims and failure to deliver results.
Warning signs of a predatory company include:
- Requests for upfront fees
- Guarantees of debt reduction
- Instructions to stop communicating with creditors
The Federal Trade Commission (FTC) cautions that you can achieve the same results yourself, for free.
Is Bankruptcy the Right Choice?
Bankruptcy may seem like a quick solution, but financial advisors suggest it doesn’t address the underlying causes of financial hardship. The NFCC’s McClary notes that restrictions on repeat filings and limitations on eligible debt can make bankruptcy as risky as using a debt settlement company.
Where to Identify Help
The NFCC can connect you with a nonprofit credit counselor in your area. Visit NFCC.org or call 888-381-4779. Avoid searching online for “debt relief” as the top results are often from for-profit companies.
FAQ
Q: What is a debt management plan?
A: A structured repayment plan negotiated with your creditors, typically offering lower interest rates and fees.
Q: How much does nonprofit credit counseling cost?
A: The initial counseling session is usually free. Debt management plans have a monthly fee, averaging $30-$40, with a maximum of $75, and can be waived in hardship cases.
Q: What’s the difference between a nonprofit credit counselor and a debt settlement company?
A: Nonprofit counselors help you create a repayment plan, while debt settlement companies advise you to stop paying creditors, which can damage your credit.
Q: Can I negotiate with my creditors myself?
A: Yes, you have the same negotiating power as a debt relief company.
