Empowered by Debt?

Apparently, young people get a thrill out of debt. A recent study by Ohio State University researchers suggests that young adults feel a boost to their self-esteem when they pile on student loans and run up credit cards. Instead of being anxious and depressed, young adults feel “mastery.” The higher their debt loads, the more in control young people think they are of their lives. The researchers had assumed that borrowing for education would be viewed positively as an investment in the future, while charging on credit cards would be viewed negatively. But for young adults ages 18 to 27, all debt is good debt. That is, until they hit the ripe age of 28. At that point, the realities of the work world appear to take hold and these older and wiser adults start to worry about how much they owe. Here’s a good New York Times posting on the findings.

This study seems to fit with a recent local news story reporting the Class of 2011 as the most indebted college graduates ever. The reporter asked some graduating seniors from an area college about their student loans. Two of the three interviewed said they owed about $100,000! It was shocking how unconcerned they seemed about paying back such a huge amount. The study suggests that young people need better advice about the potentially life-limiting consequences of debt. Here’s one financial strategy tip: Before committing to a college, students should know how much their monthly payment on their loan obligation is likely to be. Visit www.makingcollegepay.com to learn more.

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