Economy

This Is the State Where People Struggle Most With Debt

Douglas A. McIntyre

Published: May 6, 2021 7:45 am

Many of us have experienced the desperation that comes from crushing debt at one point in our lives. Whether it is student loans, car payments, credit card balances or all of the above, debt is one of the main reasons why many Americans spend years delaying important life decisions. These decisions include acquiring home equity, establishing a retirement savings account or even going to the doctor.

The “Report on the Economic Well-Being of U.S. Households in 2019” issued by the Board of Governors of the Federal Reserve System in May of last year, revealed that 28% of households could not pay a month of bills in full or would not be able to pay the bills in full if they confronted an unexpected $400 expense. Their fallback? Credit cards, payday or auto-title lenders, or support from family and friends.

The report also noted that about a fourth of adults delayed visits to the doctor or dentist because they were unable to afford the cost. Remember that this was before the economic devastation caused by the pandemic had taken full effect.

Like many aspects of American life, the detrimental impact of debt has a racial bias. Poverty disproportionately affects communities of color, and debt piles up disproportionately in nonwhite households. Communities of color have a higher amount of debt in default than white-majority communities (39% versus 24%), as well as more unsecured-loan defaults involving medical, student loan, auto/retail and credit cards balances.

To identify the state where people are struggling the most in debt, 24/7 Wall St. reviewed every state’s median debt in collections among those residents with any debt in collections from nonprofit think tank Urban Institute’s Debt in America 2021 report. The Urban Institute used credit bureau data from 2020.

The median debt in collections and the share of adults with debt in collections for communities of color and for white communities also came from the Urban Institute. The majority-white communities are based on credit records for people who live in zip codes where at least 60% of the population is white. Communities of color values are based on credit records for people who live in zip codes where at least 60% of the population is African American, Hispanic, Asian or Pacific Islander, American Indian or Alaska Native, another race other than white, or multiracial.

Like wealth, debt is distributed unevenly across the United States. Americans in some parts of the country struggle more than in others. Based on statistics compiled by the Urban Institute, 24/7 Wall St. has ranked the states according to the median amount of debt in collections in each one and found the state where the problem is the worst.

Wyoming is the state where people struggle the most from debt. Here are the details:

• Median debt in collections: $2,532
• Adults with any debt in collections: 26.1% (23rd lowest)
• Median debt in collections, communities of color: N/A
• Adults with any debt in collections, communities of color: 78.4% (the highest)
• Median debt in collections, majority white communities: $2,532 (the highest)
• Share with any debt in collections, majority white communities: 25.7% (19th highest)

Click here to see all the states where people struggle most from debt.