New York and Connecticut residents pare down the debt

A new study has revealed the states with the largest increases and decreases in debt-to-income (DTI) ratios – and New York and Connecticut are among the top 10 that saw their DTIs fall.

The study, conducted by crypto onramp platform Instaxchange.com, looked at data from the Federal Reserve regarding DTI ratios in each state for 2013 and 2023. (The DTI ratio is the measure of personal debt compared to income, indicating how much debt residents have for every dollar earned.) The states were then ranked according to those with the highest to lowest change across the decade.  

New York was fifth among the 10 states with the biggest decrease, with a 12.4% decrease (from 1.17 in 2013 to 1.04 in 2023), while Connecticut was eighth, with a 10.2% DTI decrease (from 1.62 to 1.46.) Overall, the 10 states with the biggest decreases in DTI were Washington, Illinois, California, Virginia, New York, Vermont, Maryland, Connecticut, Maine and New Jersey.

While only 12 states recorded an increase in their DTI ratio, North Dakota experienced the largest, with a 41.3% jump. In 2013, for every $1 earned, residents had $0.82 in debt. By 2023, this had risen to $1.16. Although this is a significant increase, North Dakota still maintains the second-lowest DTI ratio in the country, behind New York. Among states with the biggest increases, North Dakota was followed by Texas, Louisiana, Wyoming, Oklahoma, Idaho, Mississippi, Utah, Tennessee and Rhode Island.

Besides data from the Fed, Instaxchange.com looked at average wage data between 2013 and 2022 collected from the National Center for Education Statistics, along with information taken from Zillow regarding the average house price change in each state between September 2019 and August 2024.

The average consumer debt currently stands at $91,074, according to data from Experian. The average wage has risen by $10,700 since 2013, but average house prices – one of the largest contributors to personal debt – have increased by $40,415 in the last five years alone, leading to higher borrowing. 

Commenting on the findings, Gabriele Asaro, head of SEO and research at Instaxchange.com, said, “While it is encouraging to see the debt-to-income ratio fall in most states, the study highlights areas where consumer debt has outpaced income growth, particularly in places like North Dakota and Texas.

“This trend could be due to several factors – for instance, the soaring cost-of-living and house prices post-pandemic leading to increased borrowing. Additionally, wages may not have risen as much as expected, causing the debt-to-income ratio to inflate, even if people aren’t necessarily borrowing significantly more.

“Despite these concerns, it’s important to note that most states recorded an overall decrease. In fact, 38 states experienced a decline in their ratio, with the national average falling by 3.2%. Overall, the findings underscore the financial strain on many Americans but offer hope that these figures will continue to decline.”