Effects of Debt on Youth Self-Concept

Personal indebtedness among young adults is spiraling upwards because of aggressive credit issued in the 2000s and the subsequent financial crises in the housing and banking sectors. The current study found a positive effect of debt on self-esteem of young people. The effects of debt also vary in different financial strata. However, the results are based on a sample consisting only of young persons. More research is needed on the long-term effects of debt.

Credit facility was easily available and was aggressively marketed in the 2000s, increasing personal indebtedness in the U.S. The media highlighted the effects of financial collapse and personal debt on people about to retire. Scholars think that the middle and lower classes accrue debt to supplement incomes while the affluent classes use debt to increase income and generate wealth. Young college-aged adults earn all-time low minimum wages and pay all-time high college tuition fees. Most have a significant debt burden at the start of their careers. Debt is considered to positively affect young people’s sense of mastery and self-esteem, being an investment in status attainment. Debt might also produce negative effects due to financial stress. This study aimed to determine the effects of debt on the concept of the self in young college-goers.


  • Data of about 3079 respondents within the age bracket of 18 to 34 from the National Longitudinal Survey of Youth were used for this study.
  • Participants were divided into three classes based on parental income. Statistical analyses investigated the correlation between debt, financial class and sense of mastery and self-worth.
  • Mastery over life was measured by the Pearlin Mastery Scale, using seven items which assess the respondents’ sense of control and the ability to solve problems in life.
  • Self-worth was tested by the Rosenberg Self-Esteem Scale containing ten items. The participants also answered questions about their education debt and credit-card debt.

The percentage of people with education debt was 12.9% for the lower-class group, 21.5% for the middle-class group and 24.2% for the upper-class group. For those who actually had debt, the average amount of educational debt was $5472 for the lower-class group, $6940 for the middle-class group and $7197 for the upper class group. The percentage of people with credit card debt was 23.1% for lower-class group, 37.0% for middle-class group and 39.3% for higher-class group. For those who actually had debt, the average amount of credit card debt was $1000 for lower-class group, $1100 for middle-class group and $1500 for higher-class group. The study found that increasing amounts of college debt produced increased self-esteem, above and beyond the positive effect on self-esteem associated with a person attending college. The effects of both education and credit-card debt on mastery and self-esteem were strongest for respondents with low parental income. This effect became blunted for upper-class youth, who already had greater resources and wider options.

Next steps/shortcomings
This study tested two classes of debts, namely educational and credit card debts. Detailed aspects such as when the debt was taken and how much of it was carried forward were not taken into account. The results are based on fairly young people who just started college and long-term effects might be different. This implies that the positive effects of having a debt on the self might reduce if the person continues to be in debt.

The study found that the effect of debt in young college-goers is positive for mastery and self-esteem. Due to an initial positive effect, young adults may be encouraged to continue increasing debt and expose themselves to higher risks. It seems that most young people consider debt, especially those taken for college education, as an investment in the future but it can turn into a liability too. The current situation forces young people to borrow against an uncertain future. State and federal policies that reduce tuition support and allow privatization of college loans are dangerous trends. Private lenders might charge high interest rates. Hence, a young person might start life with a greater financial burden after finishing college than before. These aspects need to be studied because college education is seen as an investment not only for an individual but for the society.

For More Information:
Debt in Youth and Its Effect on Mastery and Self-Esteem
Publication Journal: Debt in Youth and Its Effect on Mastery and Self-Esteem
Social Science Research, 2011 By Rachel E Dwyer; Laura McCloud
From the Ohio State University, Columbus, Ohio and Pacific Lutheran University, Tacoma, Washington

*FYI Living Lab Reports Are Summaries of the Original Research.

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