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Does debt really boost self esteem for young adults? Is it just like getting a tattoo?
Rebecca Goldin, Ph.D. & Michael Adams, June 13, 2011
New research claims that educational and credit card debt increases self esteem in young adults, but a closer look at the study raises questions.

dollar sign tattooA new study published in the journal Social Science Research claims that both educational debt and credit card debt increases self-esteem and sense of mastery in young adults.  The study used a sample of 3079 respondents between the ages of 18 and 35 from the National Longitudinal Survey of Youth from 1979 to 2004. MSNBC compared taking on debt to getting tattoos, implying that young adults are showing off their prowess by taking on debt.

Scientific American said that the youth “actually felt that carrying debt was empowering.” Yet, the authors did not measure how the youth felt about their debt; they worked with data from the National Longitudinal Survey of Youth 1979- Youth Sample (NLSY79-YS), which evaluated mastery and self-esteem by asking them to identify whether statements like, “I feel I do not have much to be proud of,” or “I am satisfied with myself.” The questions did not directly pertain to debt.

The study, conducted by Dr. Rachel Dwyer of Ohio State University, involved dividing the respondents from NLSY79-YS into three groups according to their family income.  The findings suggest that those in the lowest quartile had the highest boosts to self-esteem and mastery as their debt increased. The middle two quartiles had some boosts as well, although not as significant, and the top quartile did not show a significant boost. However, people in the age group from 28 to 35 experienced more stress, the higher their debt. 

Reasons for these feelings of empowerment could include that young adults view educational debt as an investment towards their future. Credit card debt may allow them instant gratification, promoting a sense of self-worth. However, as with most social science research, cause and effect may be a tricky game.

The study used regression analysis, for which the authors have to assume that debt has a (causal) impact on self-esteem, and then to measure what the impact is. But, the skeptic can point out, causality could go the other way. In particular, why assume that debt actually leads to improved mastery and self- esteem, rather than the contrary? Perhaps self-confident, empowered youth are taking on debt because they feel they will have the income and ability to pay it off?

The partially satisfying answer to this is that the study is longitudinal and tracked the mastery and self-esteem of the respondents even before the debt was taken on. By including earlier feelings of mastery and self-esteem into the regression model, the authors were able to control for earlier feelings having an impact on debt. The authors cannot, however, control for the possibility that a new sense of self-esteem or mastery would encourage these youths to take on more debt.

While these findings suggest that debt is correlated with positive feelings in young adults, they are only a reflection of short term sentiments. Dr. Dwyer noted that these positive short term results could worsen the negative long term effects as they struggle to pay off their debts. The young adults who accumulate these debts might often have unreal expectations of their future salaries and thus take on much more debt than they can pay off.

Additional, noted, flaws in the study were that the measurements of debt were not optimal.  The terms and interest rates of the loans were not taken into account.  Since the data is relatively recent, long term effects were not evident.  The study did not mention the family's education level which could affect the self esteem of first time college goers who take on debt.


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