The debt-relief customer is getting younger. What’s driving Gen Z to seek help?

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.

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.

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.

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:

• Best for smaller debts: National Debt Relief
• Best guarantee: Americor Debt Relief
• Best for affordability: New Era Debt Solutions

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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