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The More Student Loans, the Merrier? Young Adults with High Debt Have Better Self Esteem

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It’s a fairly safe assumption that if you’re a current college student or a recent college graduate, you owe someone money. That’s because student loans and credit card debt have essentially become necessary evils.

The vast majority of today’s college students rely on financial aid—particularly student loans that must be repaid—to finance their college educations, and most of them use credit cards to cover the high cost of textbooks, school supplies, and even their daily necessities.

College Grads’ Average Student Loan Debt a Whopping $24,000

Once considered shameful, debt is now incredibly common—particularly among young adults who are earning a degree while buying the things they need and want.

A June 22, 2011 article that appeared in the weekly political and culture periodical The Nation reports that most recent college graduates enter the “real world” with an average of $24,000 in student loan debt. Many grads owe $100,000 or more and in some cases, students’ debt exceeds their total cost of tuition.

Massive Debt Helps Some Young Adults Feel Good

Surprisingly, a new rather shocking Ohio State University study reports that young adults saddled with massive student loan debt and other debts are feeling empowered about the money they owe.

Researchers found that the more credit card and student loan debt held by people between the ages of 18 and 27, the higher their self esteem. This was found to be most true among the lowest economic class. However, adults between the ages of 28 to 34 that participated in the study began to show signs of stress about the money they owed.

Rachel Dwyer, the lead author of the study, is an assistant professor of sociology at Ohio State. “Debt can be a good thing for young people – it can help them achieve goals that they couldn’t otherwise, like a college education,” she stated in the Ohio State University Research News. Dwyer conducted the study, which was published in the journal Social Science Research, along with colleagues Randy Hodson, also an Ohio State sociology professor; and Laura McCloud, an Ohio State graduate now at Pacific Lutheran University.

Financial Stress Linked to Health Problems

In 2008, USA Today explained that stress from deepening debt can take its toll on your health. Financial woes can easily cause trouble concentrating and sleeping. Other more serious debt/stress health problems reported by debtors surveyed in an AP-AOL survey included ulcers, migraines, severe anxiety, depression, and even heart attacks.

Both Student Loan Debt and Credit Card Debt Show Positive Effects

“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,” Dwyer said. “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.”

The researchers examined data on both student loan debt and total credit card debt, and looked at how both types of debt were related to respondents’ self esteem. According to The Vancouver Sun, the study was based on data collected from 3,000 young adults across the United States for the U.S. Bureau of Labor Statistics. Information was collected and interviews took place over the course of several years, up to and including 2004, prior to the collapse of the U.S. economy. Dwyer suggested that a similar analysis conducted now, following the financial crisis which began in 2008, would show less of a positive correlation between debt and self esteem.

The study’s findings revealed that young adults who fell in the lowest 25% bracket in total family income received the largest “boost” from being in debt. The more student loan and credit card debt they had, the higher their self-esteem. Middle class respondents didn’t see much impact on their self esteem based on the amount of their student loans, but credit card debt had positive effects on their self esteem—the more, the better.

Debt Allows Instant Gratification

As the daily web magazine Slate summarizes, credit cards and loans allow people to live beyond their limited means, and “living large” feels good. Most young adults enjoy the instant gratification that credit cards allow.

Slate also referred to a previous study that appeared in the journal Neuron. “Credit cards effectively anesthetize the pain of paying,” said George Loewenstein, a professor of social and decision sciences at Carnegie Mellon University. “You swipe the card and it doesn’t feel like you’re giving anything up to make the purchase, unlike paying cash where you have to hand over bills.”

Student Loan-Induced Self Esteem Doesn’t Last Forever

Hopefully the results of Dwyer’s study can help college students realize that their debt-related euphoria will deteriorate as they age: debt can make you feel good about yourself in the here and now, but it can have negative consequences in the long run.

“By age 28, they may be realizing that they overestimated how much money they were going to earn in their jobs. 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,” she explained.


Melissa Rhone+

Melissa Rhone earned her Bachelor of Music in Education from the University of Tampa. She resides in the Tampa Bay area and enjoys writing about college, pop culture, and epilepsy awareness.

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