Debt is getting harder to manage, and more Americans are turning to credit counseling and debt management for help. But increasingly, the customer seeking that help is younger.
Gen Z adults ages 18 to 29 still make up a relatively small share of debt management clients — 16% of the client base at Money Management International (MMI), one of the country’s largest nonprofit credit counseling agencies. But they’re the fastest-growing group. Over the past year, MMI has seen a 35% increase in Gen Z clients, while their average unsecured debt balance has climbed 12% since 2025, to $22,848.
“It’s getting worse, unfortunately,” Ted Rossman, principal consumer finance analyst at MMI, tells CNBC Select. “It’s always true that younger people have a difficult time getting established. But we’re seeing some particular challenges specific to Gen Z.”
So, why are young adults seeking help with debt, and what can someone in their 20s do to get ahead of it before their debt becomes overwhelming? Let’s dive in.
What Gen Z should do about their debt
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Why is Gen Z turning to debt management?
Several things are stacking up for younger borrowers, according to Rossman.
Early-career finances – Gen Z is just starting out, without the savings cushion older generations have had time to build. Salaries are lower and expenses, especially rent, student loans and childcare, have outpaced inflation for years, even before the recent spike.
Credit as a coping mechanism – Rossman pushes back on the idea that Gen Z debt comes from frivolous spending. “When people have credit card debt, it’s usually groceries, car repairs, medical bills,” he says. “It’s not usually a vacation or a shopping spree.”
Buy now, pay later is reshaping how young adults borrow – Many Gen Z consumers view BNPL as the more responsible option since payments are split into smaller installments. But Rossman cautions that it’s “still debt in a way” that has to be paid back, and he’s seeing more clients carrying BNPL debt on top of credit cards and personal loans rather than instead of them.
Personal loans aren’t solving the problem – A common pattern MMI sees is that someone takes out a personal loan to consolidate high-interest credit card debt, then runs the credit cards back up again, ending up with both debts instead of one. In MMI’s report, nearly half of new clients now carry a personal loan and the average balance on those loans is up 11% from last year.
AI is becoming a bigger referral source – MMI has seen a sharp rise in clients arriving via AI platforms like ChatGPT, especially since it added a personal finance feature in May. Clients referred this way carry higher-than-average debt ($42,500) and are more likely to already have a personal loan, suggesting they’ve tried to solve the problem themselves before seeking help.
Debt is becoming less taboo – Rossman says Gen Z is more willing than past generations to talk openly about debt and money, which he sees as a net positive, even if not everything they encounter online is accurate.
What should Gen Z do about their debt?
There’s no single number that means it’s time to seek help but Rossman offers some rough guidelines.
For those a few thousand dollars in credit card debt:
A 0% balance transfer card can work if you have a high credit card balance, especially with $3,000 to $5,000 in debt. Some offers last up to 21 months, giving you almost two years to pay it down interest-free.
The Wells Fargo Reflect® Card offers an intro APR for 21 months on transfers made within 120 days of opening the account. The Citi® Diamond Preferred® Card also offers a 21-month intro APR window, with a lower 3% transfer fee (versus the standard 5%) if you move your balance within the first four months of opening the account.
The Wells Fargo Reflect® Card is one of the absolute best cards you can apply for if you want to save on interest and pay down debit quickly thanks to its extra generous intro-APR offer on purchases and qualifying balance transfers.
- Incredible intro-APR for purchases and qualifying balance transfers
- No annual fee
- Cell phone insurance: up to $600 of cell phone protection against damage or theft. Subject to a $25 deductible
- No rewards
- No welcome bonus
- High balance transfer fee
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select’s editorial staff.
- Apply Now to take advantage of this offer and learn more about product features, terms and conditions.
- 0% intro APR for 21 months from account opening on purchases and qualifying balance transfers. 17.49%, 23.99%, or 28.24% variable APR thereafter; balance transfers made within 120 days qualify for the intro rate, BT fee of 5%, min: $5.
- $0 annual fee.
- Up to $600 of cell phone protection against damage or theft. Subject to a $25 deductible.
- Through My Wells Fargo Deals, you can get access to personalized deals from a variety of merchants. It’s an easy way to earn cash back as an account credit when you shop, dine, or enjoy an experience simply by using an eligible Wells Fargo credit card.
Balance transfer fee
Foreign transaction fee
The Citi® Diamond Preferred® Card has an exceptionally long intro-APR for balance transfers and is also notable for its reasonable 3% intro fee for balance transfers.
- One of the longest intro-APR offers for balance transfers
- Lower intro balance transfer fee
- No annual fee
- No rewards
- No welcome bonus
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select’s editorial staff.
- 0% Intro APR on balance transfers for 21 months and on purchases for 12 months from date of account opening. After that the variable APR will be 16.49% – 27.24%, based on your creditworthiness. Balance transfers must be completed within 4 months of account opening.
- There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).
- No Annual Fee – our low intro rates and all the benefits don’t come with a yearly charge.
- Buy now and pay later. Split your payment for eligible purchases of $75 or more into a fixed payment with Citi®Flex Pay.
- Get free access to your FICO®Score online.
Balance transfer fee
There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).
Foreign transaction fee
For those whose debt balance is $5,000 and climbing:
This balance is at “a bit of a tipping point,” Rossman says. Once debt gets past $10,000, balance transfer limits become harder to secure without strong credit or high income.
For those with tens of thousands in unsecured debt:
If you have tens of thousands in unsecured debt, this is where nonprofit credit counseling and debt management plans (DMPs) typically come in. MMI’s average DMP client starts with $24,067 in debt and sees their interest rate drop from 27.91% to 7.66%, paying it off in about four years instead of the 30-plus years it would take with minimum payments.
Beyond the dollar figures, Rossman says the more telling signals are less tangible, such as losing sleep over money, fighting with a partner or family about finances or consistently spending more than you bring in each month.
If you’re not sure where to start, he recommends resisting the urge to fix it alone with another loan. MMI has seen a rise in clients who took out a personal loan to consolidate credit card debt, only to run the cards back up and end up owing more than before.
With debt settlement, creditors agree to accept less than what’s owed but Rossman is cautious about it, saying it generally only makes sense once an account is already in default or collections, not while you’re still current on payments. Some for-profit firms push clients to intentionally miss payments to build negotiating leverage, he says, which is a tactic that can damage credit with no guarantee the creditor will actually agree to settle.
If debt settlement does make sense for your situation, here are a few options CNBC Select recommends:
National Debt Relief
-
Minimum debt
-
Fees
The settlement fee is 15% to 25%, depending on the amount enrolled and the state you live in.
-
Availability
Available nationwide except in Connecticut, Oregon, Vermont, West Virginia and Wisconsin.
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Highlights
According to National Debt Relief, clients who complete its debt settlement plan can reduce their enrolled debt by an average of 20% to 25%, after fees.
Pros
- Only $7,500 in debt required
- A+ rating from the Better Business Bureau
- Accredited by the American Association for Debt Resolution and the International Association of Professional Debt Arbitrators
Cons
- Not available in Connecticut, Oregon, Vermont, West Virginia or Wisconsin
Americor Debt Relief
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Minimum debt
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Fees
Settlement fees range between 15-25% of enrolled debt
-
Availability
Options and evaluations in all 50 states + DC
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Highlights
Americor also offers debt consolidation loans for up to $48,000 with terms of 12 to 60 months.
Pros
- Low minimum debt requirement
- Available in every state
- Offers debt consolidation loans
Cons
- Maintenance fees not disclosed
- High debt minimum requirement
New Era Debt Solutions
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Minimum debt
-
Fees
Settlement fee is 14% to 23% of enrolled debt.
-
Availability
Available nationwide except for Iowa, Maine and Oregon
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Highlights
Clients average 28 months to complete their debt settlement program, according to New Era, faster than many competitors.
Pros
- No monthly maintenance charges
- Accessible for Spanish speakers
- Accredited by the International Association of Professional Debt Arbitrators
Cons
- Not available in Iowa, Maine and Oregon
- $10,000 minimum debt requirement is higher than some competitors
- No mobile app
With bankruptcy, a court can discharge or restructure your debt, but Rossman describes it as close to a last resort, one that can make it harder to get approved for loans for seven to ten years. Still, you never know what options are out there unless you ask.
“Just the earlier you seek help, the more options you have,” he adds.
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