I've tackled a growing stack of old T-shirts by turning them into yarn. I followed this tutorial.
I still have a stack of sleeves and the upper portions to turn into rags - but they take up less room.
I've also been looking for patterns for knit bags and have found a few possibilities.
I've got patterns and a bag of yarns. When I'm ready for my next knitting project I'll see how the yarn knits. I hope I have enough for a bag or two.
My next cleanup project is to tackle the pile of old jeans. When they are all cut up I'll have more than enough for a quilt.