What, me worry? Young adults get self-esteem boost from debt

Instead of feeling stressed by the money they owe, many young adults actually feel empowered by their credit card and education debts, according to a new nationwide study.

Researchers found that the more and college loan debt held by aged 18 to 27, the higher their self-esteem and the more they felt like they were in control of their lives. The effect was strongest among those in the lowest economic class.

Only the oldest of those studied – those aged 28 to 34 – began showing signs of stress about the money they owed.

"Debt can be a good thing for – it can help them achieve goals that they couldn't otherwise, like a college ," said Rachel Dwyer, lead author of the study and assistant professor of sociology at Ohio State University.

But the results offer some worrying signs about how many young people view debt, she added.

"Debt can be a positive resource for young adults, but it comes with some significant dangers," Dwyer said.

"Young people seem to view debt mostly in just positive terms rather than as a potential burden."

Dwyer conducted the study with Randy Hodson, professor of sociology at Ohio State, and Laura McCloud, an Ohio State graduate now at Pacific Lutheran University.

The findings appear in a recent issue of the journal Social Science Research.

The study involved 3,079 young adults who participated in the National Longitudinal Survey of Youth 1979 – Young Adults sample. The NLSY interviews the same nationally representative group of Americans every two years. It is conducted by Ohio State's Center for Human Resource Research on behalf of the U.S. Bureau of Labor Statistics.

For this study, the researchers examined data on two types of debt: loans taken out to pay for college, and total credit-card debt. They looked at how both forms of debt were related to people's self-esteem and sense of mastery – their belief that they were in control of their life, and that they had the ability to achieve their goals.

Researchers have had two competing views of how debt might affect people's self-concept, Dwyer said. Some have said debt should have positive effects because it helps people invest in their future. Others have said credit should have negative effects because it allows people to spend more money than they make, thereby risking their future.

"We thought educational debt might be seen as a positive because it is an investment in their future, while credit card debt could be viewed more negatively," Dwyer said.

"Surprisingly, though, we found that both kinds of debt had positive effects for young people. It didn't matter the type of debt, it increased their self-esteem and sense of mastery."

Some young people may be using credit card debt to help finance their college education – for items like textbooks -- which is why they may see it as a positive, she said. But there is no way to know that from the data.

"Obviously, they are probably using credit cards for multiple purposes. Along with education spending, they could be using credit cards to pay for non-essential items. They may feel good about their debt only because it allows them to buy the things they want without having to delay gratification."

But how debt affected young people depended on what other financial resources they had available, the study found.

Results showed that those in the bottom 25 percent in total family income got the largest boost from holding debt – the more debt they held, both education and credit card, the bigger the positive impact on their self-esteem and mastery.

Those in the middle class didn't see any impact on their self-esteem and mastery by holding educational debt, perhaps because it is so common among their peers that it is seen as normal. But they did see boosts from holding credit-card debt – the more debt, the more positive effects.

On the other hand, the study found that young adults who came from the most affluent families received no boost at all from holding debt.

"The wealthiest young people have the most resources and options available to them, so debt is not an issue for them," Dwyer said.

"The groups that most need the debt – the middle and lower classes – get the most benefits to their self-concept, but may also face the greatest difficulties in paying off what they owe."

The oldest people in the study, those over age 28, were just starting to feel the stress of their debt, according to Dwyer.

For these young adults, having education debt is still associated with higher self-esteem and mastery, compared to those who don't have any such debt. That suggests they still see some benefits to investing in a college degree.

But the amount of education debt mattered – having higher levels of debt actually reduced their sense of and mastery.

"By age 28, they may be realizing that they overestimated how much they were going to earn in their jobs. When they took out the loans, they may have thought they would pay off their debts easily, and it is turning out that it is not as easy as they had hoped," she said.

Overall, Dwyer said the results suggest that debt can be an important resource for young adults that allow them to make investments that improve their self-concept. But the results may also have troubling implications for the future of young people.

" may make young people feel better about themselves in the short-term, but that doesn't mean it won't have negative consequences in the long term," she said.

"We found that the positive effects may wear off over time, but they still have to pay the bills. The question is whether they will be able to. There needs to be additional research to answer this question."

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Jun 06, 2011
INSANE!!! Correlation does not equal causation. Just because a 22 year with college debt feels more empowered than a 22 year old working at McDonalds, it does not by any means imply he feels more empowered by his debt. Generally, he feels more empowered because he is in college and has the ability to function as an adult; and I gaurantee he would feel just as empowered if he were on a full scolarship.

This is literally one of the stupiest conclusions I've ever seen. It's like saying "heart attack patients who have just been told they are to receive a transplant are momentarily happier than your average person, therefore heart attack patients are happier than everyone else and this [hiddenly] implies that we should all have heart attacks". It is literally this rediculous.

I have college debt and have never once felt empowered by it, rather, caged.

Jun 06, 2011
Yeaaaa I HATE having student debt. I try to pay off as much as possible with my own money no matter what.

But didn't they find it fishy that the lowest wealth students felt the most empowered by having debt? When their parents are making very little money, it will seem to be a greater accomplishment when they are able to go to school when their parent weren't.

But with students whos' parents have gone to college, it would have been more of an assumption that said student will be going to a postsecondary institution; therefore, less of a self-esteem boost, on average.

When has having debt ever felt great? I'm sure as hell going to feel a lot better AFTER I have graduated AND payed off my debt!

Jun 06, 2011
Since when does correlation imply causation? They conclude that debt boosts self-esteem. Can't it be a high self-esteem that instead leads to debt? This seems just as likely, or more.

But the important issue is that the study doesn't prove either way. There's also the third possibility of a common root cause to both correlated variables. Looks like science and logic just got kicked in the nuts!

Jun 07, 2011
Well, they go to school to learn and learning to love debt is one of those subjects that aren't on the list of classes, but are definitely part of the curriculum.
Wish I could have just a 1/10 of a cent for every dollar college students expend during just one year! Think how the banks love it.

Jun 08, 2011
The researchers either have no clue why, or just decline comment on why the lower age group and lower income feel empowered. Commons sense and unfortunately a dose of cynicism can answer that.
That age and income group are the "entitlement" crowd. What I mean by that is that they are most likely used to getting something for nothing throughout their lives, don't know "the value of a dollar" and are least likely to have experience actually living within their means. Combine that with easy credit and a individual financial disaster follows.

They feel empowered because they like spending money on themselves beyond what they can afford and are least likely to be hit with the reality of paying their bills.

The results of this study were a surprise to me at first, but after some thought it all makes sense. This study is scary in what it says about our country and what we are doing to our least fortunate, who evidently are more poorly prepared to make it in the real world than ever.

Jun 12, 2011
That age and income group are the "entitlement" crowd.

And what age and income group are you are apart of?

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