Economic conditions such as gas prices above $4 a gallon, according to AAA estimates, and annual inflation approaching 4%, according to the Bureau of Labor Statistics, are increasing the level of financial stress for Americans.
The National Foundation for Credit Counseling expects stress levels in the U.S. economy to rebound in the second half of the year after falling slightly in the first quarter, according to its Financial Stress Forecast released Wednesday.
The forecast considers data on consumer counseling behavior and other broad economic indicators to predict trends in the financial health of Americans. It rates the financial stress of Americans on a scale of 1 to 10, with 10 being the highest level of stress. The ratio remains at or above 6.3 as of the end of 2024, compared to a post-pandemic low of 3.5 in 2021. Forecast for the three months ending June: 6.7.
Americans are “deep in financial stress,” said Bruce McClary, senior vice president of membership and media relations at the NFCC — the result of higher rates on top of near-historic levels of consumer debt on credit cards and auto loans.
The nonprofit organization, which provides education and solutions to people struggling with their finances, especially debt management, has reported a “significant increase” in consumers seeking credit counseling, which could be a warning sign for the broader economy, the NFCC said. While it’s encouraging to see people seeking help before they run out of options and can’t pay their bills at all, the widespread struggle could be evidence of a downturn in the consumer economy, the organization said.
Wednesday’s reading “tells us that continued credit stress and affordability challenges have reached an all-time high,” NFCC CEO Mike Croxson said in a press release. “Consumers want to manage their responsibilities responsibly, but their traditional ability to do so is evaporating under current market conditions.”
How debt management programs can help reduce financial stress
David Devaney understands the weight that comes off your shoulders when you get out of debt. The 80-year-old was recovering from a back injury and subsequent surgery in 2020 when he sought help with his $45,000 debt, he says.
He racked up credit card debt before his injury for normal living expenses and occasionally helped his children with student loans or emergency expenses like car repairs, he says. He hadn’t missed paying off the credit card balance he owed, but he knew it would be difficult to keep up as he relearned how to walk after his surgery.
“I called the credit card holders and the banks and everything, they can talk to me,” Devaney said. “They just said, ‘No, we can’t help you.’ I wasn’t paying anything, and they didn’t understand what I was calling for.”
He was living on about $1,800 a month from Social Security, and even though he was living in an affordable area in Arizona at the time, his debt payments threatened his ability to continue working. After her banks refused to help her, Devaney reached out to AARP, which connected her with American Financial Solutions, an NFCC member organization based in Seattle. The organization negotiated a debt management plan with Devaney’s creditors on his behalf.
High interest rates were a big factor in Devaney’s ability to get out of debt on his own, he says. A credit counseling agency negotiated her minimum debt payments down to $900 a month from about $1,200, she says, and she was paying about $35 a month in fees to the agency. As her balance dwindled, so did her minimum payment, but she continued to pay $900 a month and even increased her payments when she was able to start working and had more money to put towards her debt.
“I found the right agency [help me] pay them, and do an excellent job,” he said.
Devaney finished paying off his $45,000 loan in 2024. He moved to New Orleans to be closer to his family, and bought a house. She spent about $3,500 on a home equity credit card, she says, but that and her mortgage are her only debts now.
Who are the best debt management programs
Anyone can enroll their unsecured debt in the credit management program through NFCC partners, McClary said. Credit counseling agencies work with creditors to reduce interest rates for individuals to help them pay off their debts. Subscribers can see their interest rates on debts such as credit cards and personal loans he says the drop is from 25% to 10% or less
“Late payments and over-the-counter fees are stopped when you enroll in a debt settlement program, and you get a reduced interest rate, so you save people thousands of dollars each year by enrolling those accounts in debt management programs,” he said.
Michael Reynolds, a certified financial planner based in Indiana has recommended similar credit counseling services to his clients in the past and “they are often a good option for people struggling to get past credit card debt, especially if they have multiple credit cards with high balances and high interest rates,” he says.
“It’s partly psychological and partly developmental, but I’ve seen really good success rates with these programs that get people out of debt,” he adds.
Debt management programs typically come with fees of $30 to $40 a month, depending on the size of the debt, McClary said, “but the fees can be waived if you’re in extreme hardship or if you hit the poverty line.”
McClary says NFCC has seen an increase in the number of consumers relying on debt to keep up with the cost of living, but that debt has become unmanageable for many.
“People are falling behind, and they’re falling behind on paying their credit cards,” he said. “They are looking hard to restore that, but they also want answers on how to get their budget to match the money they receive, how they will return. … with a certain level of affordability that they don’t see right now,” he said.
However, the silver lining is that once people get their credit under control, they are often able to get all of their mortgages down the line, McClary said.
“That is an effective method for people who are struggling, and there are many chances of success for people who have registered, even under these difficult conditions that we see in the economy,” he said.
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