Contrary to what most people might assume, credit card debt and student loans don't make young adults more anxious about their finances. In fact, a new study shows that debt actually boosts young adults' self-esteem and makes them feel more in control of their lives.
According to sociology research conducted at Ohio State University by assistant professor Rachel Dwyer, young adults between the ages of 18 and 27 feel empowered by debt - and the greater the amount of their student loans and credit card debt, the better they feel. However, as these people get older and settle into careers and homes - in the age range of 28 to 34 - they begin to feel more pressure and stress about debt, especially if they still have unpaid student loans.
Among the findings of this study, which was recently published in Social Science Research, were conclusions about the debate over whether debt is a valuable resource for young adults or a dangerous risk. Despite theories that credit card debt and student loans would each be viewed differently, the study concluded that both types of debt have positive effects on young adults' self-esteem - which means that signing up for the best credit card deals has the same impact as taking out a student loan for a Ph.D.
The confidence-boosting effect of debt was especially pronounced for young adults coming from middle- and lower-class backgrounds. All types of debt were empowering to lower-class young adults, but while middle-class students gained confidence from credit card spending, student loans had no impact on this demographic, probably because they are so common.
Although loans are a powerful way for students to gain access to educational and work opportunities, credit card debt can open doors to dangerous spending habits in the future - especially if young adults rely on them to boost their confidence and sense of worth without considering the financial consequences.