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Unlikely Self-Esteem Booster: Debt

Gen Y faces a serious debt burden with the average grad carrying something in the neighborhood of $23,000 in student loans. So how do they feel about it -- overwhelmed? Saddened? Anxious? Nope, suggests recent research, they probably feel empowered. At least for awhile

The counter-intuitive result was uncovered by a team led by Rachel Dwyer, a professor of sociology at Ohio State University. Her team analyzed data from 3,079 young adults who participated in the National Longitudinal Survey of Youth 1979. This nationally representative group is interviewed by researchers every two years, so the scientists were able to track both their debt levels and how they felt about them over time. What did the researchers find?

From the ages of 18-27, the higher a person's level of debt, the higher their self-esteem and the more in control of their lives they felt. "Young people seem to view debt mostly in just positive terms rather than as a potential burden," explained Dwyer, who went on to clarify that all sorts of debt, not just student loans, seemed to have this effect:

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. 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.

Though there was no variation in the effect produced based on the type of debt, the level of wealth of the borrower did affect how they felt about their debt. The more their debt impacted their standard of living, the more it boosted their self-image. Students from wealthy families got no self-esteem increase from holding debt, while those from the bottom 25 percent of the economic spectrum got the biggest boost. Middle-class young people split the difference. They felt no additional self-esteem from the ubiquitous reality of student loan debt, but saw an improvement in self-esteem with credit card 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," said Dwyer. And paying it off did eventually start to stress out confident young people. After age 28 they were noticeably less positive about their debt. "They overestimated how much money they were going to earn in their jobs," Dwyer explained. "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."

Perhaps then the study's findings aren't so counter-intuitive after all. Young people throughout the ages have enjoyed forgetting delayed gratification and getting things now and, unchastened by life experience and unburdened by heavy family responsibilities, are less apt to worry about worse case scenarios. The findings may be understandable, but they're still a little alarming.

Do you think young people are far less worried about their debt burden than they should be?

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(Image courtesy of Flickr user michael_swan, CC 2.0)