A recent study conducted at Ohio State University found that young adults aged 18 to 27 are not only not bothered by accumulated debt, but actually exhibit higher self-esteem and feel more in control of their lives.
The study was conducted by sociology professor Rachel Dwyer.
“Young people seem to view debt mostly in just positive terms rather than as a potential burden,” said Dwyer.
Only the oldest of those studied – participants ages 28 to 34 – began to exhibit signs of stress over money that was owed.
The study involved a sampling of 3,079 young adults. 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 lives, and that they had the ability to achieve their goals.
According to Dwyer, researchers have had two competing views of how debt might affect people’s self-image. Some have said debt should have positive effects because it helps people invest in their future. Others have taken the position that 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.”
Dwyer added that some young people may be using credit cards to finance their college educations, such as buying books, which could be seen as a positive, but said there is no way to no for certain from the data.
She said it ultimately may come down to instant gratification: “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.”
The results of the study also showed that the effects debt had depended on the person’s income level. Participants in the bottom 25% in total family income had the most signs of positive impact, while middle class participants showed no impact from having educational debt. However, the middle class participants did show improvements in self-esteem from having credit card debt; in fact, the more they had, the more their self-esteem was improved.
Young adults from affluent families received no self-esteem boost at all from holding debt.
“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,” Dwyer said.
“Debt 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.
In other words, spending in the short term may be enjoyable, but when the bill comes due, it does have to be paid.