In a population that prides itself on physical fitness, Colorado residents are financially obese, carrying around the heaviest debt burdens of any state, even pricier ones like California and Hawaii. And since 2013, they have piled on the most new debt of any state.
The per-person debt burden in Colorado was $90,760 in 2023, above the per capita rate of $85,050 in California and $82,860 in Hawaii, according to a study from Debt Relief Karma, which analyzed credit data from the Federal Reserve Bank of New York.
From 2013 to 2023, the state saw the biggest dollar increase in personal debt, $30,890, and the fourth largest percentage increase at 51.6%, behind only Utah, Texas and Idaho. The average per capita debt burden across all states is $57,627, meaning that Colorado residents are shouldering $33,133 more in debt than the typical American.
That per capita number includes retirees who have paid off the mortgage, households that pay off the credit cards each month and individuals driving a beater car they paid for years ago in cash. The actual debt burden is much higher for many individuals in the state.
On the plus side, Colorado residents earn some of the highest incomes in the country, the population has a high share of college graduates, and credit scores remain above average. Coloradans have a decent metabolism for handling debt, and creditors are more than happy to hand out high-calorie loans.
But that doesn’t mean residents and the larger state economy don’t face long-term risks, said Michael Angell, a professor at the College for Financial Planning in Denver.
“The three greatest obstacles to building wealth are debt, inflation and taxes. Broadly speaking, there are two types of people in the economy: those who pay interest and those who collect it,” he said in an email. “At present, Coloradans as a group appear to be on the wrong side of that divide.”
He said excessive debt undermines long-term wealth accumulation and retirement preparedness. Over time, many households may find they haven’t saved enough to support their golden years. And those heavy debt burdens leave Colorado more vulnerable to economic shocks, especially if unemployment surges or if there is a housing downturn.
“High debt burdens also raise the likelihood of slower future economic growth, as households divert income toward debt service rather than consumption or investment,” Angell said. “Growth driven primarily by expanding credit rather than rising earnings is typically unsustainable and increases the risk of a sharper correction when conditions weaken.”
Different kinds of debt
Financial advisers make a distinction between “good” debt and “bad” debt, not unlike dieticians who separate out good and bad cholesterol. Borrowing to buy a home, obtain a degree or start a business are examples of “good” debt. Running up the credit cards to pay for GrubHub deliveries and bar tabs or borrowing to buy a flashy but rapidly depreciating new car — not so good.
Even good debt can turn bad if there is too much of it, or if the expected payoff fails to pan out. That could include buying a home that is too large and costly to maintain, earning a degree that doesn’t translate into a job or starting a business based on a whim rather than a solid plan.
About three-quarters of household debt in Colorado is related to mortgages, Angell said. And a rapid appreciation in home prices appears to correlate with the rapid escalation in debt that state residents piled on.
Colorado home prices rose 128% between 2013 and 2023, while metro Denver prices rose 138%, according to a federal index that tracks home values. Price gains have tempered since then, but the rate of appreciation has far outstripped incomes, which are slowly catching up.
Colorado has one of the lowest rates of homeowners owning their properties free and clear, and one of the highest mortgage debt-to-income ratios in the country after California.
“With the high level of debt that Coloradans are carrying, this will limit the upside potential in real estate,” Glen Weinberg, managing partner of Denver-based Fairview Commercial Lending, predicts in a blog post. “The increased debt burden will make it substantially harder for many to qualify for a new mortgage as either a first-time homebuyer or move-up buyer.”
Weinberg doesn’t think debt burdens will result in a 2008-style crash, but a price decline of 15% and a “frozen” market aren’t out of the question, especially in metro Denver. Buyers who paid up to get into a home after 2021 could face a difficult time exiting without a loss.
Vehicle prices spiked during the pandemic, and it doesn’t help that Colorado drivers have a strong preference for larger trucks and SUVs over sedans and more compact and affordable alternatives. Auto debt in Colorado is about $1,200 above the national average, according to Experian.
The typical car buyer in Colorado spends $41,000 on a vehicle and puts $5,000 down, resulting in an average loan of $36,000. That translates into a payment of around $700 a month at current interest rates. GoBankingRates, in a 2024 study, put the average car loan payment in Colorado at $657 a month.
Colorado is also on the high side for college costs and average student loan debt, although mildly so. The average federal student loan balance in 2024 was $37,400 in the state, just above the national average of $36,200. But the state has a lot of people with student loan debt, about 733,700 borrowers per federal counts.
And after mortgages, auto loans, and student loans, there are credit cards, and those are what get a lot of borrowers into trouble.
It sneaks up on you
Matt Gleason, a Colorado native, grew up in a divorced household where money habits differed. His dad’s side was very conscientious and followed a budget, while on his mom’s side, things were less structured, more in the moment. His mom managed to get along until cancer struck a devastating blow to her health and her finances.
Gleason, 31, borrowed a significant amount of money to go to college, but his father stepped in and paid the obligation. His degree in music production, while enjoyable, didn’t pay off in a studio job, and he has made a living providing one-on-one music lessons.
In 2018, he and his partner, Mikayla, an early education teacher, rented a one-bedroom apartment in Federal Heights for $1,056. Although each of them had car loans and Mikayla had student loans, things were still manageable, enough so to take on a two-bedroom apartment for $1,350 a month in 2019.
In 2020, Gleason’s mother died, and his financial situation began deteriorating.
“Between the COVID thing, grieving for my mom, socializing with friends, we were spending what we didn’t have,” he recalled.
It wasn’t long before the couple found themselves juggling multiple payments on multiple credit cards and getting hammered by the high interest rates. Inflation kicked in hard, driving up prices for basics. Worn tires required $800 to replace and medical emergencies with their pets were both unexpected and costly.
Gleason eventually reached a breaking point when he realized he couldn’t cover the credit card minimums and still have enough to make the rent. Hitting up relatives wasn’t a long-term solution. He took a second job making deliveries for a catering app and, in 2023, sought out a nonprofit debt consolidation service called Money Management International.
“That was the big catalyst to helping get things under control,” Gleason said. “I am still actively paying off that plan. If it weren’t for them, I would have been swallowed up in debt and interest. A big pivot point was being able to consolidate everything at a much lower interest rate.”
The couple gave up their credit cards, reexamined their spending, and slowly chipped away at the $25,000 debt, getting it down to $10,000 in two years.
That left them in a stronger financial position when their landlord last year hiked the rent up to $2,200, which was 70% above the initial rent charged in 2019. They found a larger and nicer two-bedroom with an attached garage in Louisville for $2,300 a month.
“People are coming to us with significantly higher levels of debt. They are faced with a higher budget deficit. The amount they are short every month has been steadily rising,” said Thomas Nitzsche, vice president of public relations with Money Management International, which is based in Stafford, Texas.
Credit cards are a familiar, relatively safe financial tool that people try to use to bridge the gap in their finances. They buy time, but don’t represent a solution. Eventually, people run out of runway, Nitzsche said.
Angell said total debt payments shouldn’t exceed 36% of gross income and households should maintain at least six months of expenses in an emergency reserve.
While that is standard advice, it can be hard to pull that off in a state where a quarter of renters are paying 50% or more of their income to keep a roof over their heads, and where housing affordability ranks near the bottom.
Debt consolidation can work for borrowers like Gleason who make the hard changes required and remain consistent in paying down their obligations. Consumers need to watch out for unsavory players looking to profit on their distress, and they should never use the breathing space a consolidation loan provides to add on more debt.
Under those circumstances, debt consolidation can work, Angell said.
Nitzsche said his nonprofit has experienced a big surge in younger consumers reaching out, which he said is “not a great sign.” Instead of hearing from people in their 40s and 50s, more people are getting into trouble in their 20s and 30s.
“We aren’t going to use credit cards again until we are smart enough to pay them off every month. We went cold turkey,” Gleason said.
While Gleason takes responsibility for his predicament, he also points to deeper problems within Colorado, a formerly affordable state where basic living costs have become crushingly burdensome for average workers.
Get more business news by signing up for our Economy Now newsletter.