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Credit cards boost self-esteem

By Marcie Geffner · Bankrate.com
Wednesday, June 8, 2011
Posted: 3 pm ET

Driver's license, move over. Debt is now the symbol of a young person's adult empowerment, according to a study by three academic researchers.

Rather than feeling burdened, young adults, aged 18 to 27, actually had more self-esteem and a greater sense of control over their own lives due to credit card and college loan debts.

Debt can help young people achieve their goals, but it comes with significant dangers, according to Rachel Dwyer, the study's lead author and an assistant professor of sociology at Ohio State University.

Nonetheless, young people "seem to view debt mostly in just positive terms, rather than as a potential burden,” Dwyer said in an article on the university's website.

The researchers examined data on student loans and credit card debt, looking at how these obligations were related to the participants' self-esteem and sense of mastery over their lives and their ability to achieve their goals.

“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 … increased their self-esteem and sense of mastery.”

Participants whose family income ranked in the lowest quartile got the largest boost from being in debt, and the more debt they had, the bigger the positive impact was. Those in the middle income groups showed no effect of student debt, but positive effects from credit card debt, and again more debt created more positive effects. Young adults in the most affluent families received no boost from being in debt, perhaps because they had access to greater resources.

Young adults aged 28 to 34 showed signs of stress related to debts. Student loans were still associated with higher self-esteem and mastery, but having higher levels of debt reduced the effect.

"By age 28, they may be realizing they overestimated how much money they'd earn in their jobs," Dwyer said. "When they took out the loans, they may have thought they'd pay off their debts easily, and it's turning out that it's not as easy as they'd hoped."

The study was conducted by Ohio State’s Center for Human Resource Research on behalf of the U.S. Bureau of Labor Statistics, using data from a national survey of 3,079 young adults. The study was supported by a National Science Foundation grant.

Follow me on Twitter: @marciegeff

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