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Credit Counseling May Help Reduce Consumer Debt

By the end of fourth quarter 2018, total household debt in the United States reached a new high of $13.54 trillion. A new Economic Inquiry study found that nonprofit credit counseling—which reaches millions of consumers a year and provides financial education, individualized financial counseling, and debt restructuring services—can be an effective strategy for addressing consumer debt issues.

Wednesday, July 3, 2019 12:01 am EDT
"This research shows some of the most rigorous evidence to date on the benefits of nonprofit credit counseling in helping distressed households manage their debt levels"

By the end of fourth quarter 2018, total household debt in the United States reached a new high of $13.54 trillion. A new Economic Inquiry study found that nonprofit credit counseling—which reaches millions of consumers a year and provides financial education, individualized financial counseling, and debt restructuring services—can be an effective strategy for addressing consumer debt issues.

For the study, researchers analyzed the credit of counseled individuals versus a matched comparison group of noncounseled individuals. Individuals who underwent credit counseling experienced a substantial decline in debt relative to the comparison group, and credit counseling was also associated with an increase in credit scores for consumers with the lowest credit scores prior to counseling.

“This research shows some of the most rigorous evidence to date on the benefits of nonprofit credit counseling in helping distressed households manage their debt levels,” said co-author Stephen Roll, PhD, of Washington University in St. Louis. “Though these results are encouraging, more work is needed to understand the longer-term effects of credit counseling services on consumer credit profiles. Our findings also speak to the need for policymakers, researchers, and practitioners to find ways of helping households better address their debt issues before they fall into crisis and experience large credit score declines, which can have lasting implications for consumers’ financial security.”

Additional Information

Link to Study: https://onlinelibrary.wiley.com/doi/10.1111/ecin.12802

About Journal 

Published since 1962, (formerly Western Economic Journal), EI is widely regarded as one of the top scholarly journals in its field. Twenty-two Nobel laureates are among EI's long list of prestigious authors.

Besides containing research on all economics topic areas, a principal objective is to make each article understandable to economists who are not necessarily specialists in the article's topic area.

About Wiley

Wiley drives the world forward with research and education. Our scientific, technical, medical, and scholarly journals and our digital learning, certification, and student-lifecycle services and solutions help students, researchers, universities, and corporations to achieve their goals in an ever-changing world. For more than 200 years, we have delivered consistent performance to all of our stakeholders. The Company's website can be accessed at www.wiley.com.

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