Magazine article American Banker

Card, Loan Debt Found to Boost Self-Esteem

Magazine article American Banker

Card, Loan Debt Found to Boost Self-Esteem

Article excerpt

Byline: Kate Fitzgerald

Many young adults feel empowered - not ashamed - by credit card and student loan debt, according to a national study by a team of sociology researchers.

The study, based on in-person interviews every two years from 1986 through 2004 with 3,079 adults age 18 to 34, concluded that those carrying personal debt reported a higher sense of self-esteem than did those without it. Credit card debt in particular contributed to a higher sense of self-esteem for some young adults, the study found.

Incurring credit card and student loan debt in recent years has contributed to "positive social psychological effects" that might have been misleading for many young adults who may have equated debt with higher future earnings and income levels, leading to feelings of positive self-esteem, according to the study.

"The core mechanism is basically an application of the cognitive consistency principle: 'If they lend me money, I must be a future high roller,' " the researchers wrote.

Self-esteem effects from debt varied according to the income levels of respondents' families of origin, the study found.

Young adults from families whose income fell into the bottom 25% reported a higher sense of self-esteem from carrying both credit card and student loan debt, while respondents from middle-income families reported higher self-esteem particularly from carrying credit card debt.

Those from families whose income fell into the top 25% reported no significant difference in self-esteem from carrying either credit card debt or student loan debt.

Carrying student loan debt appeared to be "normative" among middle-income respondents, and a "conscious investment choice" among lower-income respondents. Credit card debt particularly appeared to contribute to "a positive sense of control and self-worth among middle-class youth," the researchers wrote. …

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