So Money with Farnoosh Torabi — Episode 1890: Ask Farnoosh: All Things Debt Relief

Date: October 10, 2025
Host: Farnoosh Torabi

Main Theme

This episode is dedicated to all things debt relief, tailored to the current environment where Americans are burdened with record-breaking levels of debt—credit cards, mortgages, student loans, and car loans—amid rising delinquencies and economic uncertainty. Farnoosh answers listener questions on how to tackle debt, whether to pause investing to pay down balances, the pros and cons of various debt relief strategies, and how to make smart loan choices in today’s market. Throughout, she offers practical frameworks anchored in realism, psychological motivation, and an eye toward both financial security and mental well-being.

Key Discussion Points & Insights

1. National Debt Landscape & the Case for Debt Relief

[02:52]

• Debt Stats: U.S. household debt now exceeds $17.6 trillion; credit card debt alone crosses $1.1 trillion, with rising delinquencies, especially among younger borrowers.
• Purpose: Addressing the full spectrum of “debt relief”—DIY strategies, when to get professional help, what to avoid, and practical steps for moving forward.

Notable Quote

“Debt relief programs...run the gamut. They're not all created equal. They can be a lifeline, though, for those of us who feel really overwhelmed and can't keep up with payments.”
—Farnoosh Torabi [04:01]

2. Should You Use a Debt Relief Program?

[04:35] Question from Marco

• When to Consider: If you feel unable to keep up with payments.
• What to Look For: Prefer nonprofit, accredited organizations (e.g., NFCC.org).
• What to Avoid: Companies promising to erase or settle debts "for pennies on the dollar" often charge high fees and can damage your credit.
• What to Ask: Always demand a written plan spelling out costs, duration, and credit impact.
• Alternative DIY: Contact lenders for hardship or modification plans; many offer relief not heavily advertised.

3. Balancing Self-employment, Stability, and Debt Repayment

[07:49] Question from Mary

• Dilemma: Should Mary take a “regular” job for six months to pay down debt, or continue as a self-employed wellness coach?
• Advice:
  • Seek stable, predictable income (even short-term) to pay debt and rebuild savings.
  • Maintain a reduced presence in self-employment for future flexibility.
  • On Bitcoin: Don't invest emergency funds in volatile assets until debt is down and savings are robust.
• Emotional Reframe: Taking a job isn’t failure, it’s “figuring it out.”

Notable Quote

"Bitcoin is extremely volatile...If my husband came to me and said, let's buy bitcoin, I'd be like, sure, let’s make sure this is money that you can roll the dice with, and if you lost all of it tomorrow, you wouldn't regret it."
—Farnoosh Torabi [10:21]

4. Debt Payoff vs. Emergency Savings: Which Comes First?

[13:52] Question from Megan

• The Framework:
  • If you have less than 3 months’ expenses: Prioritize building that cash safety net.
  • Once reached: Split free cash 70% to high-interest debts, 30% to savings.
  • When to Re-balance: Every 3–6 months or if circumstances change (expenses, interest rates).
  • Ultimate Savings Goal: 6–9 months of living expenses, then go "full speed" on debt.

Notable Quote

“Cash is your safety net. And I don't think we're in a recession right now, but we could be. We are due for one, for sure.”
—Farnoosh Torabi [14:50]

5. Tackling Large Credit Card Balances: Methods, Motivation, and Consolidation

[17:28] Question from Brittany

• Step 1: Get organized—list every card, balance, rate, and minimum.
• Strategy:
  • Avalanche method: Pay off highest interest rate cards first for cost savings.
  • Snowball method: Start with smallest balance for quick wins and motivation.
• Consolidation:
  • 0% balance transfer card (if credit 680+; repay within intro period)
  • Fixed-rate personal loan (predictable payoff, often lower rate)
• Avoid: Continuing to use cards as you pay down balances; switch to cash/debit for tighter discipline.
• Behavioral Trick: Disconnect cards from online shops for friction/barrier.

Notable Quote

"If you can't face the debt, you can't face the debt payoff."
—Farnoosh Torabi [18:14]

6. Should You Use a HELOC to Pay Off Student Loans?

[24:33] Question from Dr. Marari

• Current rates: HELOCs (8–9%) are higher than federal student loans (4–6%).
• Risk: Student loans are unsecured; HELOC puts your home at risk.
• Additional Factors: Federal loans carry protections (IDR, potential forgiveness).
• When a HELOC makes sense: Only if, and when, rates fall below your current loan rates.

7. Getting the Best Car Loan in 2025

[27:08] Question from Caro

• Current average rates: New car — ~7.2%, Used car — ~12%.
• Best Practices:
  • Put 20% down.
  • Prefer 4-year or shorter loan terms.
  • Keep total car expenses under 15% of take-home pay (loan + insurance + gas + maintenance).
  • Pre-shop: Get quotes & pre-approvals before visiting dealerships; negotiate rates on-site using other offers as leverage.
  • Certified pre-owned is safest for used cars.

8. Pausing Retirement/College Savings to Pay Off Debt

[31:49] Question from MB Raz

• Scenario: $192k in debt, $10k 401(k), $4k in kid’s 529 plan.
• If debt is high-interest (>10%): okay to pause retirement and education savings for a year to tackle debt “laser-focused.”
• Do NOT: Withdraw from retirement accounts (tax/penalty risks).
• After major progress: Consider consolidating remaining balance with a personal loan (if needed).
• 529s: “Nice to have,” but not a priority over securing your own finances.
• Temporary Sacrifice: Make it short-term, then get back on track.

Notable Quote

“I would commit to one year of laser-focused debt repayment…The key here is to make this temporary and know it's temporary—you're investing in your debt, but also in your peace of mind so that you can go back to business as usual and continue to invest in your future.”
—Farnoosh Torabi [34:54]

Notable Quotes & Memorable Moments

• “Stability wins for now.”
  —Farnoosh Torabi [09:42] (on taking a job for debt payoff)
• “Pay off that smallest balance. It’s not maybe your highest interest rate card, but it’s something that you can hopefully do relatively quickly and then maybe move on to the next.”
  —Farnoosh Torabi [19:31] (on snowball method)

Key Timestamps for Important Segments

• [02:52] — Setting the stage: Debt in America now
• [04:35] — Should you use a debt relief program? (Marco’s question)
• [07:49] — Self-employment vs. stability, pausing to fix debt (Mary’s question)
• [13:52] — Pay off debt or build savings first? (Megan’s question)
• [17:28] — How to tackle large credit card debt (Brittany’s question)
• [24:33] — Should you use a HELOC for student loans? (Dr. Marari’s question)
• [27:08] — Car loan tips for today’s environment (Caro’s question)
• [31:49] — Should you pause investing for debt payoff? (MB Raz’s question)
• [34:54] — Emphasis on short-term sacrifices for long-term peace of mind

Resources Mentioned

• SoMoneyLinks.com — Curated links to reputable resources for comparing rates, finding professional help, high-yield savings, car loan rates, debt calculators, etc.
• NFCC.org — National Foundation for Credit Counseling for trustworthy debt counseling.

Takeaways

Farnoosh doesn’t sugarcoat: managing debt is tough, but with clear strategies, prioritization, and self-advocacy, relief and peace of mind are possible. She continually emphasizes self-compassion, the importance of temporary tradeoffs for future stability, and using every resource at your disposal (professional or DIY).

Next Episode Teaser

Monday: A special episode on couples and money with guest authors Heather Bonaparte and Douglas Bonaparte, tackling real-life “sticky” financial situations in relationships.

Episode Summary by So Money Podcast Summarizer
(For those who haven’t listened, this summary covers all the practical advice, mindset shifts, and standout moments from a listener-centric debt relief Q&A—delivered with Farnoosh’s trademark warmth and directness.)