What Do You Really Get With a Debt Management Plan?

Simplified payments, very low interest rates, and extra guidance

young couple reviews a pile of bills on a coffee table.


Asking for help can be daunting, but when it comes to debt, seeking professional guidance may save you time, money, and stress. Enrolling in a debt management plan (DMP) is one way to get help tackling unsecured debt, such as from credit cards, personal loans, or medical bills—but it’s not an easy way out.

A DMP is administered by a nonprofit credit counseling agency to help consumers pay off their debt, in full, under reduced interest rates and a simplified payment schedule. Not everyone qualifies (income and budget need to support a large monthly payment), and only about half of those who do qualify successfully complete the repayment plan. 

DMPs aren’t generally free, either. You’ll usually pay a set-up fee (typically ranging from $10 to $50), plus an ongoing monthly fee (typically $20 to $75) based on the counseling agency you’re working with, the state you live in, and your debt balance. (Some agencies waive fees for low-income applicants or military members.)

That said, a DMP can create structure, save money over time, and provide extra guidance to people determined to get out of debt. 

Key Takeaways

  • While you can, on your own, piece together separate financial assistance options to create a debt management plan, of sorts, all that effort might not produce enough relief from overwhelming debt.
  • Debt management plans that are facilitated by a certified, nonprofit credit counseling agency offer simplified monthly payments, interest-rate discounts and fee waivers, and professional guidance. 
  • Debt management plans are not quick-fix solutions for getting out of debt. Programs last four to five years and require dedication to new spending habits that will help get—and keep—you out of debt.
  • Enrolling in a DMP may be a good option if you’re overwhelmed with multiple unsecured debt balances and don’t want to file for bankruptcy.

Seven years ago, Felicia La Sharrel Moore got sick and medical bills started piling up, despite her health insurance coverage. Her savings were wiped out, and she was facing nearly $20,000 of debt. A TV commercial prompted her to call Consolidated Credit Counseling to learn more about the debt management plan service it advertised. Moore was skeptical, but wanted a change. Now, about three years later, she’s healthy and all that debt is paid off.

“It is not magic, but I don’t regret it one bit,” Moore said. “You’ve got to want to actually get out of debt, and I was sick of robbing Peter to pay Paul. You have to be in it for the long haul and stick with it, but the DMP taught me habits that I’ve still got today.”

Can You DIY a Debt Management Plan?

There are several ways you can manage debt on your own, including negotiating settlements with your creditors, or making your own repayment plan and following a systematic approach to paying your debts. However, piecing together a do-it-yourself debt management plan may be difficult. 

You can make phone calls and request financial hardship assistance from each lender, for example. But if you’re already struggling to keep up with minimum payments, that might not be enough.

“Some of the hardship plans are comparable to what you might get with a debt management plan, but each one is separate,” said Mike Sullivan, director of education for the credit counseling agency Take Charge America. “You will have to call each credit card company, negotiate a deal, and convince them you need the plan. Most hardship plans are just for a year. They are really temporary options to relieve pressure until you get income back and you can start up normal payments again, not a long-term solution.”


The more accounts you’re juggling, the more complicated the DIY process can get.

“If you are having multiple conversations with multiple creditors, the more complex the arrangements might be,” said Bruce McClary, vice president of communications for the National Foundation of Credit Counseling (NFCC). “They might not all offer the same thing, and the unevenness of that approach may leave you with very mixed results. You may make no progress with some and some progress with others.”

It all depends on what the bank is willing to do for an individual consumer, explained Megan Hanna, a freelance contributor for The Balance and a former banker. Few consumers are experienced negotiators and anyone seeking debt assistance may already have a rocky repayment history with the creditor. 

“If you are part of a larger bank, they will be more rigid because they can afford to take more losses, take you to court, and sue,” Hanna said. “They will pursue whatever avenue they can. If you are with a smaller institution, it’s more personal because there are fewer customers and they have more time to work with you one-on-one. They don’t have larger budgets to hire an attorney or outsource collections, so they might be more willing to work with you.”

So while you can DIY a DMP, there are strong reasons to enroll in a plan coordinated by a certified credit counselor.

“If you only have one credit card, with a little bit of prep work, a DIY approach could work for you,” McClary said. “But, a DIY approach to debt is no different than a DIY approach to home repair. If you aren’t an experienced plumber or electrician, maybe you shouldn’t take on too much yourself.” 

What You Get When You Enroll in a Debt Management Plan

When you decide to seek professional help, a credit counselor reviews your debt, income, and budget and decides if you’re a good candidate for a debt management plan. If you are, and you decide to enroll, here’s what you’ll get when you pay for a DMP. 

Simplified Monthly Payments 

If you enroll in a DMP, your credit counselor will make all your monthly payments using the funds you supply in one lump sum payment you send directly to the agency along with the monthly service fee for the plan. That means you’ll only have one due date and one payment to worry about and fit into your budget, rather than several bills due of varying sizes and dates. 


A debt management plan will also clearly outline how long it will take you to repay your debt. Plans are typically four to five years long, but the exact duration will depend on your individual situation.

Focusing on making one monthly payment that gets you closer to a $0 balance can help alleviate the stress that often accompanies big debt bills. Knowing there is an end in sight can be motivating, too, according to Moore.

“I had 13 accounts when I started out, so the plan got rid of a significant mental burden,” she said. “It felt like I was really moving through something instead of being on a hamster wheel I couldn’t get out of. Each time I made a payment, that was a good feeling.”

Lower APRs and Fees

One of the most valuable parts of a DMP may be the interest rate and fee cuts a credit counselor will negotiate for your unsecured debt accounts. But those reduced rates come at a cost. 

“The tradeoff is the accounts are closed, but the fee waivers and interest rate reductions are a huge break. It allows the full repayment of principal at a much lower rate,” said Martin Lynch, director of education for Cambridge Credit Counseling.

Credit counseling agencies have established relationships with banks and credit unions. They understand bank and credit union policies, which gives them a leg up when it comes to negotiating more affordable debt repayment terms. 

“[Financial institutions] may be willing to work with an agency if it means they can get back some of what they would otherwise lose,” Hanna said. “Banks are more likely to trust a counselor or agency that has helped get them funds in the past than an individual consumer who is struggling. It’s a business deal, really.” 


Interest rate cuts vary among banks, and the exact terms are kept tightly under wraps.  Based on feedback The Balance got from credit counselors interviewed for this article, interest rates are typically dropped to 1%-8% for DMP clients. 

“We have a pretty good understanding of what the big banks are going to do when we go to them on behalf of a new DMP client,” Taking Charge America’s Sullivan said. “We know that some institutions might lower rates to 3%-4%, and others may lower rates to 1%-2%.” 

Lynch said the average DMP client comes to Cambridge Credit Counseling with five accounts that have an average interest rate of 25%. “The average of all rates after the banks grant concessions is currently just over 7%, which represents substantial savings and gives people the breathing room they need in their budget moving forward,” he said.

For perspective, the average credit card interest rate is 20.28%. Many cards charge a 29.99% penalty rate (also called the “default rate”) to cardholders that fall behind on their card payments. Interest rates slashed to 8% or lower can result in major savings over the course of debt repayment. 

Professional Guidance and Accountability

If you’re feeling overwhelmed by debt, having someone in your corner to offer guidance and even take care of some of the heavy lifting—like calling banks to negotiate new repayment terms—may be valuable. Enrolling in a DMP through a certified nonprofit credit counseling agency means you won’t be tackling the debt all on your own.

“Reviewing my situation with a counselor really made me think about what I was spending money on and what I couldn’t buy,” Moore said. “I was even working a part-time job on the side, but at the end of the day, you only make what you make. It made me treat my money like it was really precious.”

Several of the credit counseling agencies The Balance spoke to for this article told us they offer extra support to brand-new DMP clients, too. “We know that debt repayment is really a habitual thing,” Sullivan said. “So for the first 90 days, we really keep close tabs on the new clients as they are getting used to the arrangement.”

If you stop making DMP payments, your credit counselor may reach out to make sure things are OK, which can help keep you accountable while you're enrolled. “Credit counseling agencies will proactively stay in touch with consumers during the program,” McClary said. “If there are any sorts of disruptions along the way, they can help them course correct to keep it from falling off track.” 

Why Debt Management Plans Fail

Debt management plans can offer structure and reduce debt repayment costs, but the programs aren’t fool-proof. Half of all consumers who enroll in a debt management plan fail to  complete the program. Budgeting burnout and additional, unexpected financial burdens are the two main reasons why. 

After the initial financial counseling and budgeting session, it’s the consumer's responsibility to dial back extra spending to make room for the monthly debt payment and plan fee. That requires discipline.

“In most cases, people have to cut back on their spending to make a DMP work,” Sullivan said. “That can be very difficult when you’re talking about cutting back $300-$500 a month. That’s a big lifestyle change that can be hard to stick with for several years.” 

Unlike debt settlement, repaying debt under a DMP means you’re paying back the full amount you owe. For some, that large sum can be daunting, especially since debt repayment doesn’t exist in a vacuum. 

“You’ve got to be patient and get your mindset right,” Moore said. “Life still happens while you are on the program. First you have these car things, and then there is something going on with the house. It’s tough, and I can imagine why some people have a tough time finishing.” 


While DMPs are fixed repayment plans, some counseling agencies—including those certified by the NFCC, and some in the Financial Counseling Association of America (FCAA) network—may offer additional temporary help to enrollees who find themselves in new situations that stretch their finances thin, such as unexpected medical bills, job loss, or car repairs.

Temporary hardship options may include partial payments for a few months or dropping interest rates to 0% for a little while to get back on track. However, it’s on the consumer to reach out to the counselor for additional help in times of need. DMPs are completely voluntary. 

“People are under no obligation to us,” Lynch said. “If you want to stop paying, you can.”

Is a Debt Management Plan Right For You?

A DMP may be a good option to explore if:

  • You have high-interest credit card debt, large medical bills, or several accounts in collections.
  • You’re juggling multiple debt payments each month.
  • You have enough money to pay the upfront and ongoing fees to the credit counseling agency for the plan, or qualify for DMP fee waivers based on your income or military status.
  • You have a reliable source of income.
  • You are willing to overhaul your budget.
  • You’re capable of sticking with it.

If you don’t or can’t meet these requirements, you may need to consider other options, such as debt settlement or bankruptcy. But these both have serious consequences for your credit and should only be viewed as a last resort.


To explore the DMP route, look for a certified, nonprofit credit counselor, which you can find through NFCC or FCAA. They’ll be able to evaluate your situation and determine if, with reduced interest rates and some spending changes, a DMP will work well for you. 

“Ask questions and don’t be intimidated,” Moore said. “It’s your money and your life. You have the right to ask for help and make a decision that’s right for you.”

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. NFCC. "Non Profit Debt Management Plans and Programs." Accessed June 8, 2021.

  2. Experian. "A Debt Management Plan: Is It Right for You?" Accessed June 7, 2021.

  3. GreenPath Financial Wellness. "Debt Management Plans." Accessed June 8, 2021.

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