How to Get a Handle on Debt in 2024

With U.S. household debt at a record level and credit card debt topping $1 trillion, it's not surprising that paying off loans and credit cards is the most common New Year's resolution for boomers and Gen X in 2024, according to The Ascent personal finance site. The trick is actually doing it.

Only 47% of credit card holders with balances have a plan to pay them off, a recent Bankrate survey found.

"An increasing number of people, especially older Americans, are carrying debt from month to month. And the balances they're carrying are growing," Bruce McClary, senior vice president of the National Foundation for Credit Counseling said on the debt-reduction episode of the Friends Talk Money podcast I co-host.

Especially concerning: Interest rates on credit cards are about five percentage points higher than in spring 2022, on average, and rates on some department-store cards now exceed an eye-popping 34%. That has led to a rise in late payments.

Monthly car loan payments have been soaring, too, due to rising auto prices. So has medical debt, which is owed by one in three Americans.

Another problem: Student loan borrowers are facing long hold times trying to reach their loan servicers and getting inaccurate billing statements, according to a January 2024 report from the Consumer Financial Protection Bureau.

Debt has become so overwhelming that the number of people aged 55 and older filing for bankruptcy has doubled in the past 16 years, accounting for 20% of all bankruptcy filings these days, my podcast co-host Terry Savage noted.

"If ever there was a year to avoid getting further into debt, this is that year," said McClary. "If you become less dependent on debt and your credit-card balances are under control, 2024 is going to be a winning year for you."

Here are a few suggestions to reduce your debt load in 2024:

Call your credit card company and try to negotiate down your rate. A recent LendingTree survey found that 76% of people who asked their card issuers for a lower rate got one — often six percentage points below what they'd been paying.

"It bothers me that so few people actually think to call up their creditor and have that discussion," said McClary. "It's an easy conversation to have, but you don't know what you can get unless you ask."

Look into a 0% offer for a balance-transfer credit card. Many card issuers, eager to attract customers, dangle 0% interest rates for 18 months or so for people who transfer over their current credit card offers.

Swapping your high-rate credit card for one charging 0% might save you hundreds or thousands of dollars. You can find such offers on sites like NerdWallet and Bankrate.

Just be sure you know what the new card's regular interest rate is since you'll pay that when the 0% deal expires if you have a balance at that time. "This is not a long-term strategy; it's great in the short term," said McClary.

Find out, too, if there are fees to transfer your credit-card balance. Typically, the fee is 2% or 3% of the balance you're rolling over.

Not everyone can qualify for a 0% balance-transfer card, though.

"To get one, you can't have had any late payments," said Friends Talk Money co-host Pam Krueger.

You generally also need a top credit score in the high 600s or above to get approved for a balance-transfer card. So, before applying, ask your bank for your credit score or go online and request a free credit report. You are entitled by law to one free report per year; if you need more than one, you will have to pay for the score from one of the three big credit bureaus: Experian, Equifax or TransUnion.

• If you have a lot of medical debt, try negotiating with your doctor or hospital. You might get a reduction in the amount you'll owe by agreeing to pay the provider faster.

• Meet with a nonprofit credit counselor. The free session to create a debt action plan will likely take 30 minutes to an hour, either in person or by phone.
  
  The National Foundation for Credit Counseling, the nation's oldest nonprofit for improving financial well-being, never turns anyone away; its 1,215 certified credit counselors work in 250 locations around the country.
  
  A debt action plan can stop the debt collection calls and emails that heighten financial stress.

• If you have student loan debts, apply to enroll in the U.S. government's SAVE (Saving on a Valuable Education) plan. This income-driven repayment program, which replaced the REPAYE (Revised Pay as You Earn) plan, calculates your monthly payment based on your income and family size.
  
  SAVE lowers payments for many borrowers and it will become more generous in February. Then it will start forgiving debt in as few as 10 years if borrowers originally took out $12,000 or less in student loans, down from 20 to 25 years previously.
  
  Loans eligible for SAVE are direct subsidized and unsubsidized student loans, direct PLUS loans for grad students and Direct Consolidation Loans that didn't repay any PLUS loans made to parents. Loans that aren't eligible include Direct PLUS loans made to parents, Federal Perkins Loans and any loans currently in default.

• Take advantage of the government's newly extended deadline for debt forgiveness. Originally, the program to consolidate loans for the forgiveness was scheduled to end Dec. 31, 2023. "It just got extended to April 30," said Savage.
  
  This debt forgiveness program is for Federal Family Education Loans (FFEL), school-held Perkins loans, Health Education Assistance Loans (HEAL) and Parent PLUS loans in repayment for at least 25 years.
  
  If you're not sure whether your loan qualifies, go to the Loan Breakdown part of the StudentAid.gov site.

• If your debt load is crushing, investigate filing for bankruptcy. A nonprofit credit counselor can discuss the pros and cons and help you go this route if appropriate.
  
  In fact, nonprofit credit counseling is a required part of the process for filing a Chapter 7 liquidation bankruptcy or a Chapter 13 bankruptcy with a debt repayment plan.
  
  "If you're in the early stages of falling behind, there's still a way to work things out with your creditors to get back on track without going to the nuclear option," said McClary. "But if you're facing potential legal action, that may be a more appropriate time to think about settling your debts and trying to get out of this with a pennies-on-the-dollar kind of approach."

• Sign up for a budgeting app to take control of your spending. The most popular one — Mint — was shut down by its owner Intuit late last year. But there are quite a few others that could be helpful.
  
  They include YNAB (formerly called You Need a Budget), Quicken Simplifi, Rocket Money, Tiller and PocketGuard. You'll typically pay $35 to $100 a year, but many of the apps have one- to three-month free trials.

"If you'll be using an app," said McClary, "just make sure your data is secure."

Richard Eisenberg is the former Senior Web Editor of the Money & Security and Work & Purpose channels of Next Avenue and former Managing Editor for the site. He is the author of "How to Avoid a Mid-Life Financial Crisis" and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS MoneyWatch. Read More