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Does Debt Boost Self-Esteem?

By Eva Norlyk Smith, Ph.D.
June 15, 2011

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Can credit card debt make you feel better about yourself? For most people, this would seem counterintuitive. However, a recent study found that some young adults do get a boost in confidence from their debt.

Researchers at Ohio State University found that, among young people aged 18 to 34, those with higher levels of student loan debt felt more empowered and had a greater sense of self-worth. Young adults with higher levels of credit card debt, in turn, showed a similar pattern. The results were part of a large nationwide study conducted by Ohio State’s Center for Human Research and were based on interviews with more than 3,000 young adults.

For most people, debt is viewed as an unwelcome burden — causing many to wonder why it would be perceived so differently by young adults. However, experts hypothesize that debt could lead to a temporary sense of control.

“Debt can be a good thing for young people,” said Rachel Dwyer, lead author of the study and assistant professor of sociology at Ohio State University in a university news release. “It can help them achieve goals that they couldn’t otherwise, like a college education,”

According to Dwyer, the researchers had expected that student loans might be viewed as a positive investment in one’s future, but they expected that credit card debt would be viewed more negatively.

“Surprisingly, though, we found that both kinds of debt had positive effects for young people,” said Dwyer in the release. “It didn’t matter the type of debt, it increased their self-esteem and sense of mastery.”

The effect was greatest among young adults from low-income or middle class families. In fact, students who came from families in the bottom 25 percent of income levels showed the strongest link between debt and self-esteem: The higher the debt, the greater the boost to self-esteem and feelings of mastery. Young adults from middle class families didn’t derive greater self-confidence from educational debt, but they did from credit card debt. In contrast, those from the most affluent families showed no correlation between debt levels and self-esteem.

Some experts caution, however, that the results of the study might not be as clear-cut as they might seem. “The study could be confusing correlation and causation,” says Anya Kamenetz, author of “Generation Debt.” “It’s entirely possible that the students who have more confidence in themselves are more likely to take on more debt, because they already have this image of themselves that they can do anything that they want.”

Kamenetz also points out that the data for the study was collected back in 2004—long before the 2008 credit crisis reshaped our way of thinking about debt and spending in significant ways. Would the study authors find the same results if they repeated the interviews today?

“A lot of things have changed 180 degrees in just a few years.” says Kamenetz. “Many young people have seen their parents go through unemployment, and they themselves are dealing with the aftermath of the recession in different ways.”

In short, you live, you learn. As evidently, did the young adults in the study. The researchers found that the older study participants — those aged 28 to 34 –were far more likely to feel burdened by debt. They also reported a reduced sense of mastery and control as a result of their debt.

“By age 28, they may be realizing that they overestimated how much money they were going to earn in their jobs,” said Dwyer in the news release. “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.”




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