Social Science Research 40 (2011) 727–741

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Social Science Research

journal homepage: www.elsevier.com/locate/ssresearch

Youth debt, mastery, and self-esteem: Class-stratified effects

of indebtedness on self-concept
Rachel E. Dwyer a,⇑, Laura McCloud b, Randy Hodson a
a
Department of Sociology, Ohio State University, 238 Townshend Hall, 1885 Neil Avenue Mall, Columbus, OH 43210, USA
b
Department of Sociology and Social Work, Pacific Lutheran University, Xavier Hall, Room 101, Tacoma, WA 98447, USA

a r t i c l e i n f o a b s t r a c t

Article history: Young adults at the turn of the 21st century came of age in a time of unprecedented access
Received 27 August 2010 to credit but slowed growth in earnings, resulting in a dramatic increase in indebtedness.
Available online 3 March 2011 Debt has been little studied by sociologists, even though it is increasingly important in
financing both attainment and a middle-class lifestyle, especially for youth in the transition
Keywords: to adulthood. We study the consequences of indebtedness for young adults’ sense of mas-
Debt tery and self-esteem as stratified by class. Young adulthood is a crucial developmental per-
Youth
iod for mastery and self-esteem, which then serve as a social psychological resource (or
Educational loans
Credit card debt
deficit) into the adult years. Research suggests that young people have divergent perspec-
Stratification tives on debt: some focus on credit as a necessary investment in status attainment, while
Class others worry that readily available credit invites improvidence that can erode the self-con-
cept as debt encumbers achievement and future consumption and increases a sense of
powerlessness. We find that both education and credit-card debt increase mastery and
self-esteem, supporting the hypothesis that young people experience debt as an invest-
ment in the future, and contradicting the expectation that debt used to finance current
spending will lower mastery and self-esteem. Our expectation that debt effects are accen-
tuated for those of lower- and middle-class origins but blunted for those of upper-class ori-
gins is supported. We find, however, that the positive effects of debt appear to wane among
the oldest young adults, suggesting the stresses of debt may mount with age. We conclude
that further study of the long-term consequences of debt will be essential for advancing
contemporary stratification theory and research.
Ó 2011 Elsevier Inc. All rights reserved.

1. Introduction

Popular concern about spiraling personal indebtedness in the US has grown with unprecedented access to debt during the
2000s credit boom. The housing and banking crises that brought the boom to its dramatic end have highlighted the wide-
spread social vulnerability that can result from rising indebtedness. Yet scholars have only a limited understanding of the
implications of debt for attainment processes. The typical focus of stratification research on education, occupation, and in-
come largely overlooks financial well-being realized as debt, wealth, and consumption (see Mossakowski, 2008; Spilerman,
2000). Even the growing literature on wealth focuses more on assets and net worth than on the potentially distinct effects of
debt (Henretta, 1979; Keister, 2000a,b). It is by now clear, however, that debt plays an increasing role in supporting con-
sumption among American families at the turn of the 21st century (Leicht and Fitzgerald, 2006). Scholars also argue that
debt effects are highly class stratified, as the middle and lower classes take on debt to supplement incomes that are falling

⇑ Corresponding author.
E-mail address: dwyer.46@sociology.osu.edu (R.E. Dwyer).

0049-089X/$ - see front matter Ó 2011 Elsevier Inc. All rights reserved.
doi:10.1016/j.ssresearch.2011.02.001
728 R.E. Dwyer et al. / Social Science Research 40 (2011) 727–741

behind those of the more affluent upper classes, who use debt in a context of growing income and wealth (Sullivan et al.,
2000).
Historical trends like rising indebtedness shape individual biographies and they have particularly important effects for
people moving through key life transitions (Elder, 1994). Popular press coverage of the financial collapse and personal debt
has focused especially on their impact for people near retirement who have seen their savings evaporate, but there are also
special concerns for youth moving through the transition to adulthood (Draut, 2006). Congress recognized risks for young
people in the recent Credit Card Accountability Responsibility and Disclosure Act of 2009, which requires a parent, guardian,
or spouse to be the primary cardholder for anyone aged 21 or younger, along with other protections (Credit CARD Act of
2009). But these protections are partial and easily reversed. The young adult years include key steps in status attainment
such as attending and completing college, securing first jobs, and building new households separate from families of origin.
In this paper we study the role of debt for the crucial generation of young adults coming of age in an environment with great-
er access and perceived need for debt than any previous generation.
The current generation of young adults enters into college and early adulthood at a time when minimum wages are near
an all-time low and college tuition is at an all-time high (Slesnick, 2001). In this context, young adults are being lent what
they might have been paid in previous generations and many will start their careers carrying significant debt (Leicht and
Fitzgerald, 2006; Manning, 2000). Banks, educational lenders, and credit card companies have aggressively made themselves
available to facilitate rising debt. The consequences of this new reality of entering adulthood with debt are uncertain. And
the future is made even more uncertain by stagnant wages, rising job insecurity, and upward spiraling health insurance costs
(Mishel et al., 2007). Will higher future earnings allow a sensible repayment plan? Or will debt be a burden that constrains
career choices, family formation, and home ownership? Who will survive and prosper and who will flounder in this new era
of acquiring substantial debt even before full adulthood (Mishel et al., 2007)?
We cannot know with certainty outcomes that have not yet occurred. But it is possible to get early purchase on the role of
youth debt in future attainments and transitions by looking at the consequences of debt for young people as they prepare to
enter into their careers. Much of the popular and academic writings on youth debt concentrates on the aggregate patterns of
rising indebtedness, but less on how youth themselves experience indebtedness and how debt affects key developmental
processes.
Scholars disagree about the consequences of debt for youth’s self-concept in the sense of mastery and self-esteem, with
some expecting positive effects as debt facilitates investment in status attainment and others expecting negative effects be-
cause of the financial stress of consuming beyond current income. The importance of debt in achieving key attainment goals
such as education suggests that there may be positive effects on mastery and esteem if debt is seen as a rational investment
that will pay off in the future (Frank, 1999; Bowen et al., 2009). Other research suggests that the sense of mastery and self-
esteem may be early casualties in the process of accumulating debt (Loonin and Plunkett, 2003). In the new environment of
readily available credit, youth may take on more debt than they can handle, with negative consequences for their sense of
self even before longer-term effects on status attainment develop (Manning, 2000). Research suggests, for example, that
young people experience more debt stress and anxiety than older groups (Drentea, 2000). The impact of debt on youth
self-concept provides evidence on the immediate consequences of indebtedness for the those taking on debt but may also
suggest a pattern of longer-term effects as mastery and esteem are resources that affect later life outcomes (Mirowsky and
Ross, 2007; Reynolds et al., 2007). Perhaps most important, these effects are likely to differ by social class as debt may be the
only way to finance life goals for young adults from the lower and middle classes, whereas it is only one of a set of resources
available to more advantaged youth. Young people are the carriers of the future and the connection between their individual
experiences and the emerging structure of society – the connection between history and biography – must be at the core of
any sociology of debt.

2. The rise of indebtedness

American youth are today coming of age at a time of unprecedented access to debt and sharply rising indebtedness. While
some focus on individual profligacy and the perceived propensity of ‘‘generation debt’’ to over consume, major political and
economic changes have laid the groundwork for this shift to debt-based lifestyles (Kamenetz, 2006). The deregulation of
financial markets made credit much more widely available as banks were allowed to offer loans to individuals with less
attractive credit histories and lending terms (and fees) proliferated (Black and Morgan, 1999). At the same time, companies
increasingly invested profits in the financial sector, hugely expanding the liquidity available for loans (Krippner, 2005). The
result has been a democratization of credit, where Americans at the turn of the 21st century have much more access to loans
than in previous decades. This shift has been particularly consequential for groups historically overlooked by the credit
industry, such as young adults (Kamenetz, 2006). Increasing access to credit provides youth abundant opportunity to accrue
debt – both to invest in educational attainment and to support current consumption. These unprecedented changes mark a
significant historical shift that is likely to shape the life courses of the cohorts of youth most exposed to credit during the
transition to adulthood (Elder, 1994; Zaloom, 2009).
One of the biggest increases in youth indebtedness is through education loans. Student debt became more common with
growing enrollments in post-secondary schools and precipitous increases in tuition. From 1977 to 2003 the number of en-
rolled students increased by 44%, but student loan volume grew a stunning 833% (Draut, 2006). Increasing college costs ex-
 R.E. Dwyer et al. / Social Science Research 40 (2011) 727–741 729

plain part of the difference – in just the ten years from academic years 1994–1995 to 2004–2005, inflation-adjusted tuition
and fees increased by almost 50% at public 4-year colleges, and by 34% at private colleges (College Board, 2009). Student bor-
rowing increased along with college costs, as one-third of full-time, full-year students took on loans in the 1992–1993 aca-
demic year, but fully half held loans just 10 years later in 2003–2004 (NCES, 2010), with average loan amounts for all
enrolled students reaching $7000 (Wei et al., 2009). This leaves the typical graduating senior with $15,123 in federal loans,
which even at subsidized interest rates can grow through substantial interest charges each year (Lewin, 2009). With largely
stagnant incomes, the burden of college debt repayment has risen from 6.7% of after-tax income to 8.5% of after-tax income
just between 1993 and 2001 (Choy et al., 2005). While many in society are distressed by the increasing reliance on loans to
finance education and argue for greater state subsidies for college tuition (Draut, 2006; Kamenetz, 2006), there may be little
alternative for middle-class youth looking to secure their class standing and lower-class youth seeking upward mobility
(Leicht and Fitzgerald, 2006). Growing earnings disparities between college graduates and those with less education have
raised the stakes for gaining a college degree, making education increasingly important to status attainment (Morris and
Western, 1999).
Credit-card debt has also increased sharply among youth. In an analysis of Survey of Consumer Finances data, Draut and
Silva (2004) report that youth aged 18–24 carried an average of almost $3000 in credit-card debt in 2001, and young adults
aged 25–34 carried $4000. Consumer loans are attractive for youth, who are more likely to have low incomes, especially with
the stagnation of wages in entry-level jobs. Credit cards also allow some flexibility in the amount and schedule of repayment,
which can be particularly attractive to young people who may anticipate higher incomes in the near future than they are
currently making (Draut, 2006). Minimum payments, however, make it easy for consumers to overspend – especially for
youth with less experience handling money – and small purchases can add up quickly. Banks have also developed new ways
to increase their profits, with fees, interest rate hikes, and aggressive marketing. There is wide concern that young people are
especially vulnerable to these profit-making tactics because they are less experienced with financial matters (Manning,
2000; Draut, 2006; Credit CARD Act of 2009). Making only minimum payments also ensures that the costs of debt increase
each month through the addition of finance charges and thus works to keep individuals in debt for increasing lengths of time
(Chen and Devaney, 2001). The increased availability of credit therefore brings potentially dangerous risks of minimum pay-
ment traps and ballooning balances. This situation could be extremely damaging for wealth accumulation among young
adults, as future income will for years be used to pay for past purchases.

3. Debt as necessity or improvidence

Despite widespread concern about the social trend of rising personal indebtedness, there has still been strikingly little
research on the impact of debt for individual debt-holders. The early ground-breaking work that has been done demon-
strates that debt-holding has significant consequences for mental and physical health, but much of this focuses on older
adults (Drentea, 2000; Drentea and Lavrakas, 2000; Sullivan et al., 2000; Jacoby, 2002; Loonin and Plunkett, 2003). Debt
may, however, be particularly consequential for feelings of mastery and self-esteem in young adulthood. The transition to
adulthood is an important developmental period for mastery and self-esteem, as youth become increasingly independent
and involved in making consequential choices within the opportunities and constraints of their social context (Lewis
et al., 1999). Mastery and esteem developed early in life can have long-term effects in their influence on people’s sense of
control and capability for making future decisions (Reynolds et al., 2007). Research shows that attainment processes and so-
cial stressors affect mastery and self-esteem, leading to differential accumulation of these emotional resources across the life
course (Thoits, 1995; Mirowsky and Ross, 2007; Reynolds et al., 2007).
The concept of debt as a necessity for securing the future focuses on how credit allows people to move toward goals their
current income could not support and can thus be a vital instrument of status attainment. It is widely accepted that access to
credit is a key social good in modern capitalist economies, and lack of access is a significant form of social exclusion (An-
thony, 2005; Klawitter and Fletschner, forthcoming). Studies of wealth disparities, housing inequalities, and intergenera-
tional mobility argue that expanding access to credit in the 20th century helped build the American middle class, and
obstacles to attaining credit for disadvantaged groups – including women, immigrants, and racial minorities – have impeded
their upward mobility (Oliver and Shapiro, 1995; Keister, 2000b; Dwyer, 2007; Akresh, forthcoming).
Viewed as an investment in the future, credit is particularly important for young people in the transition to adulthood
because they are likely to have lower incomes and relatively few accrued assets to support their aspirations. A college edu-
cation is an investment in human capital that is crucial to improving one’s life chances (Attewell and Lavin, 2007; Bowen
et al., 2009; Morris and Western, 1999). It may be quite rational to encumber future income if taking on debt will ultimately
result in a larger income stream (Friedman, 1957). Education loans may also generate limited stress during the college years
as these debts are relatively invisible because they do not demand monthly payments.
The reasoning behind an investment interpretation of credit-card debt is more complex, but is suggested by information
about the uses of credit-card debt for young people (Kamenetz, 2006; Manning, 2000). There is a ready exchange between
educational debt and credit-card debt as young people finance their living expenses during college with a combination of
student loans and credit-card debt (Sallie Mae, 2009). Colleges are popular locations for credit card marketing because they
provide credit companies with a constantly replenished population of upwardly-mobile young individuals that they can at-
tract as lifelong customers (Manning, 2000). There are other uses of credit-card debt that may also be experienced as forms
730 R.E. Dwyer et al. / Social Science Research 40 (2011) 727–741

of investment – for example, purchasing clothes to make a positive impression at job interviews or at work or joining fra-
ternities or sororities to secure access to advantageous social networks (Frank, 1999). Some young adults may even use cred-
it-card debt to invest in early entrepreneurial activities. Positive effects of debt on self-concept may also may be rooted in the
ability of consumer goods to provide tangible symbols of ‘making it’ (Zaloom, 2009). A close reading of the limited literature
on debt and stress provides at least some hints of this possibility. For instance, Drentea and Lavrakas (2000) find that for a
sample of adults a greater accumulated amount of credit-card debt produces anxiety but that, net of the amount of debt,
carrying a monthly balance forward actually reduces anxiety. Bernthal et al. (2005) make a similar argument that credit
cards can be used as a ‘lifestyle facilitator’ that supports the development of personal identities and goals.
Youth who perceive their debt as a necessary investment should experience a sense of developing the capacity to control
one’s life and enhanced feelings of self worth as debt-holding represents action taken to secure one’s socioeconomic position
and may even result in upward mobility (Mirowsky and Ross, 2007). A sense of mastery comes from the capability to control
one’s circumstances, and self-esteem is built through good choices and a positive outlook for the future that contribute to a
feeling of self worth. This reasoning leads to the expectation of positive effects of debt on self-concept:
Hypothesis 1. College loan and credit-card debt contribute to a greater sense of mastery and self-esteem for young adults
because they represents a necessary and reasoned investment in status attainment.
Other scholars focus more on debt as a risky way to fund current, even improvident, consumption by borrowing from the
future and take a considerably more jaundiced view of the consequences of indebtedness. This work focuses less on individ-
ual cognitions, but suggests that debt is a stress that negatively affects self-concept. In this view, expanding access to credit
makes it easier for people to get into debt quickly and without much consideration of the future. Scholars identify numerous
pressures to buy goods in consumer societies, including status competition (Schor, 1998), the diffusion of preferences
through social networks (Frank, 1999), and the saturation bombardment of advertising and shopping opportunities that fos-
ter over-consumption (Schudson, 1984; Ritzer, 2004; Dwyer, 2009). Whereas a view of debt as investment emphasizes an
agentic perspective that debtors take on loans after a rational calculation of costs and benefits, students of over-consumption
worry about the power of big business to manipulate, entice, and cajole individual consumers into overextending them-
selves. Encouraged by Madison Avenue advertising and Wall Street bankers into spending beyond their means, consumers
may find themselves suffering from a form of debt peonage that, far from fostering social mobility, instead undercuts more
rational investments in the future and ultimately socioeconomic attainment (Leicht and Fitzgerald, 2006).
Young people in the transition to adulthood may be particularly likely to become overextended because of their lower
resources and relative inexperience managing financial affairs – and recent cohorts have an unprecedented opportunity
to do so. There is increasing popular and academic concern that students are excessively burdened with educational debt.
Students are often not well-informed about how much debt they can pay off and qualitative research shows students are
often unprepared for how expensive college will be (Christie and Munro, 2003). Even if educational loans help students
achieve their occupational goals, they may experience significant financial stress as they accrue debt and begin to pay it back
– especially disadvantaged youth (Draut and Silva, 2004; Draut, 2006). The explosion of credit card availability is particularly
important – and copious evidence shows that banks target young adults relentlessly (Ritzer, 1995; Manning, 2000). Credit
card use has also become more socially acceptable – even normative – for recent cohorts, which may leave young people
unaware of its dangers (Durkin, 2000). Young people may find it difficult to resist the easy availability of money (Kamenetz,
2006). The resulting financial burden may feel unmanageable and may undercut attempts to achieve future goals since stud-
ies find that financial stresses reduce mastery and self-esteem (Chou and Chi, 2000; Schieman, 2001; Caplan and Schooler,
2007). The literature on the negative consequences of debt thus suggests a competing hypothesis that accumulated debt
leads to feelings of being out of control, feelings of reduced capacities to meet goals, and lower self-regard:
Hypothesis 2: College loan and credit-card debt contribute to a lower sense of mastery and self-esteem for young adults because
debt allows spending in excess of income, which results in financial stress.
Positive or negative debt effects on mastery and self-esteem will have short-term implications for youth’s use of debt in
status attainment, but also potentially longer-term implications for debt use and financial management across the life
course. These are competing expectations to the extent that individuals will likely perceive their debt primarily as a neces-
sary investment or improvident over-consumption at a particular point in time. But these perceptions may evolve so that the
very same debt once taken on with a sense of rational investment may later be interpreted as improvident. A parallel may be
found in the many consumers who bought homes during the 2000s housing boom as a good financial move, but now see
their investment sour as an improvident excess in hindsight. By studying this very young cohort of youth we can gain pur-
chase on early perceptions of debt as a baseline to understand later changes.
Our focus on mastery and self-esteem allows us to analyze the ordinary and widespread effects of the new regime of a
debt society, in contrast to approaches that focus on extreme indebtedness, as in studies of bankruptcy (Sullivan et al.,
1989, 2000). We are interested, in other words, in the chronic day-to-day effects of accumulated debt rather than the acute
effects of a personal financial crisis – effects that may be especially relevant for young adults who typically have not yet faced
bankruptcy (and whose federally subsidized student loans cannot be discharged in bankruptcy). The impact of debt on es-
teem and mastery may be more of a background factor in daily life than during the crisis of bankruptcy and may thus be less
proximate and more muted as a cause of self-concepts. But running debt balances may ultimately have more important
cumulative effects across time as mastery and self-esteem become important foundations for future behaviors that support
 R.E. Dwyer et al. / Social Science Research 40 (2011) 727–741 731

effective life choices (Thoits, 1995; Reynolds et al., 2007; Mirowsky and Ross, 2007). We also expect, however, that the ef-
fects of debt, whether reflecting a sense of investment or remorse over improvident consumption, will vary by class position.

4. Class differences in the effect of debt on self-concept

Previous theories of investment versus consumption uses of debt are incomplete to the extent that they fail to specify
how these effects will differ depending on the class status of the debtor. Wide gaps in income and wealth in American society
mean that young adults from different class backgrounds move through the transition to adulthood with markedly different
resources at their disposal. These differences contribute to increasing variability in paths through the transition to adulthood
and in the development of mastery and esteem (Bernhardt et al., 2001; Mortimer, 2003; Lewis et al., 1999). Our inquiry into
the effects of debt thus requires a class analysis.
Historical shifts in the stratification structure have accentuated class inequalities in the United States. In the last decades
of the twentieth century, affluent households received the majority of income gains while middle- and lower-class house-
holds fell behind (Neckerman and Torche, 2007). From 1979 to 2003, income grew 49% for the top fifth of households, 9% for
the middle fifth, and only 1% for the bottom fifth (Mishel et al., 2007). While there was some relief in the boom of the late
1990s, the rise in inequality resumed in the 2000s. This trend is particularly important for lower-class and middle-class
youth in the transition to adulthood who face a more competitive and high stakes stratification system, and more difficulty
maintaining or surpassing the standard of living of their family of origin. Families have made various adjustments to respond
to these trends, including increasing labor force participation, but most important for our study is the increasing reliance on
debt to make up for lost consumption and investment opportunities in the middle and working classes (Leicht and Fitzger-
ald, 2006).
The replacement of income with debt is not just an individual household response, but also results from a striking mac-
roeconomic shift in the distribution of the returns to increasing productivity. Leicht and Fitzgerald (2006) argue that rising
inequality and the expansion of credit are both linked to a large-scale change in the organization of modern capitalism. Eco-
nomic productivity increased significantly in the 1980s and 1990s, but unlike earlier decades those productivity increases
were not realized as wage gains for lower- and middle-income workers (Mishel et al., 2007). Instead, companies kept and
invested their profits, massively expanding the capital in the financial system, and leading to the historic expansion in
the availability of credit as banks attempted to find investments for newfound cash. The result, Leicht and Fitzgerald argue,
is that in recent decades ‘‘the middle class has been loaned money it could have been paid’’ (2006: 76). The high tide of cap-
ital availability also made credit more accessible to lower-class households and debt became an essential ingredient in their
attempts to achieve upward mobility (Black and Morgan, 1999). Debt also increased their vulnerability to financial crisis,
however (Sullivan et al., 2000). The upper class, in contrast, continued to receive sizeable income gains during this period
(Mishel et al., 2007).
The effects of debt on mastery and self-esteem should therefore vary for young adults from different class backgrounds as
disparities between these groups have been exacerbated by historical trends in social inequality. The psychological conse-
quences of debt will thus depend in part on the class-based opportunities and constraints youth face. Youth from lower-class
households may be particularly affected – either positively or negatively – because debt has become more important to class
mobility as their family resources have been eroded and prospects for working-class jobs with good wages have dried up:
Hypothesis 3: The effects of debt on mastery and self-esteem are accentuated for lower-class young adults, who have fewer fam-
ily resources to fall back on and worse labor market prospects than middle- and upper-class youth.

While middle-class youth have more resources than lower-class youth, middle-income families have also seen little in-
come growth and debt is even more available to them as financial institutions target those struggling to maintain a middle-
class standard of living. Young people from middle-class households appear to have come increasingly to rely on debt for
class reproduction and debt is thus a crucial part of their efforts to remain middle class:
Hypothesis 4: The effects of debt on mastery and self-esteem are also prominent for middle-class young adults, whose families
are struggling to maintain their class status as it becomes more difficult to hold onto a middle-class job and standard of living.

On the other hand, youth from upper-class backgrounds are likely to be shielded from the effects of debt because they
have additional resources to secure their futures, and more family reserves to help them pay back any debt accrued:
Hypothesis 5: The effects of debt on mastery and self-esteem are blunted for upper-class young adults, who are sheltered by
family income and wealth unavailable to lower- and middle-class origin youth.

Understanding the implications of the changing political economy of debt on the life course experiences of young adults
thus requires class analysis. We expect significant divergence in the consequences of debt for the self-concept of young peo-
ple from different class positions. Any such differences add to the impact of debt on structures of inequality as those with the
fewest resources are affected the most – positively or negatively – by the expansion in the availability of credit at the turn of
the 21st century.
732 R.E. Dwyer et al. / Social Science Research 40 (2011) 727–741

5. Data and methods

We use multiple years of the National Longitudinal Survey of Youth 1979 – Young Adults sample (NLSY79-YA) up to 2004
to evaluate the impact debt holding has on youth during a time of high credit use. The NLSY is administered biannually by
the Bureau of Labor Statistics and the Young Adults sample is made up of the children of female respondents of the 1979
NLSY cohort. The Young Adult cohort is ideally suited for our study because it includes youth as they transition to adulthood
during the historic period of rising indebtedness. The status of these respondents as children of the NLSY respondents also
makes available important linked data on parental social status. As these young people age, the data will be increasingly use-
ful for tracking the consequences of youth debt as these are manifest throughout the life course.
We limit our sample to youth at least 18 years of age, who are not in high school, and are responsible for at least some of
their financial obligations to ensure that all respondents included in the analysis were eligible to access credit, resulting in a
sample of 3079 respondents. The age range for this group is from 18 to 34, but the majority of the respondents are in their
early to mid-twenties, with a median of 22 years and 80% aged 25 or younger. We control for age in all analyses and conduct
supplemental analyses stratified by age, which we discuss further in the results section.
We measure our dependent variables of mastery and self-esteem with two widely used Likert scales included in the
NLSY79-YA. The Pearlin Mastery Scale is composed of seven items intended to assess respondents’ sense of control over
their life: ability to solve problems in life, feeling pushed around or bullied, amount of control they have in their every-
day lives, ability to do what they set their minds to, amount of helplessness when dealing with everyday problems,
sense of control over what happens in the future, and ability to change important things that happen in their lives
(Pearlin and Schooler, 1978). The alpha value for the mastery scale is .68. The Rosenberg Self-Esteem Scale includes
ten items to assess respondent self worth: I am a person of worth; I have a number of good qualities; I am inclined
to feel I am a failure; I am as capable as others; I feel I do not have much to be proud of; I have a positive attitude;
I am satisfied with myself; I wish I had more self-respect; I feel useless at times; and I sometimes think I am no good at
all (Rosenberg, 1989). The alpha value for the self-esteem scale is .83. Measures were coded so that a higher value indi-
cates greater mastery or self-esteem.
We have theorized that debt-holding impacts the sense of mastery and self-esteem, but the causal order could also run in
the other direction so that people with greater mastery or self-esteem are more willing to take on debt (Caplan and Schooler,
2007; Mirowsky and Ross, 2007). Fortunately, the data includes measures of mastery and self-esteem in every survey year.
The repeated measurement aspect of the NLSY79-YA longitudinal data thus allows us to control for the possibility of reverse
causality by including the earliest available measure of mastery and self-esteem (when respondents were in their late teens)
as an independent variable. The measures of prior self-concept control for the stable component of mastery and self-esteem
and thus give a clearer view of the specific impact of debt.
The key independent variables for our analysis are education debt and credit-card debt. We include the two types of debt
in the model separately because the debt is taken on through different processes and there may be differential effects, espe-
cially by class. Education debt is the summation of the amount borrowed as student loans for each survey year the respon-
dent was enrolled in higher education. A two-question sequence yields this data: (1) ‘‘Did you receive a loan to cover any of
the costs for this year’s college expenses?’’ and (2) ‘‘What is the amount owed on the loan(s)?’’ We include 2004 and every
previous survey year to create the most complete cumulative measure of education debt possible. Credit-card debt is the
balance after the last payment at the time of the survey in 2004. These data come from another two-question sequence:
(1) ‘‘Do you owe over $500 to any stores, doctors, hospitals, banks or anyone else?’’ and (2) ‘‘Rounding to the nearest dollar,
how much do you owe altogether on your credit cards?’’ Table 1 reports mean and median debt holding by respondent social
class for all respondents and for debt-holders only. Most differences by social class are significant in chi-squared tests (for
percentages) and ANOVAs (mean and median differences), supporting our decision to class stratify the analyses. Note that for
the majority of debt measures, upper-class origin young people actually carry the greatest amount of debt, which may reflect

Table 1
Education and credit-card debt by social class.

Lower class Middle class Upper class All classes

Percent with education debt 12.9% 21.5% 24.2% 19.1%
Mean education debt $704 $1492 $1740 $1258
Mean education debt for debt-holders only $5472 $6940 $7197 $6596
Median education debt for debt-holders only $3400 $3850 $5000 $4000
Percent with credit-card debt 23.1% 37.0% 39.3% 33.2%
Mean credit-card debt $710 $1047 $1174 $953

Mean credit-card debt for debt-holders only $3070 $2832 $2990 $2872
Median credit-card debt for debt-holders only $1000 $1100 $1500 $1200
N 1208 1409 462 3079

Note: Comparison tests are significant at p < .05 for all debt holding variables except median education and credit-card debt holders only, which are
significant at p < .10. Chi-squared tests were used for the percentage variables, and ANOVAs for mean and median comparisons.
 R.E. Dwyer et al. / Social Science Research 40 (2011) 727–741 733

higher tuition costs in private schools, which they disproportionately attend, as well as a greater willingness to take on debt,
which they see as a manageable short-term encumbrance.
Because many respondents have no debt, we create spline functions for both education debt and credit-card debt. The
spline splits each form of debt into two component variables: (1) a dummy variable indicating whether the respondent
has any debt, and (2) a continuous measure of the total debt held with zeros for non-debt holders. The simultaneous esti-
mation of the effects of these two variables models debt more accurately than a simple linear function, enables us to distin-
guish the effect of having any debt from the effect of having more or less debt, and reduces the bias due to the skew of the
underlying debt variables (Wojtkiewicz, 2003). To further reduce skew, we also top-coded four cases involving very high
amounts of education debt at $30,000 and three cases of high credit-card debt at $10,000 – the 99th percentile for each type
of debt. In sensitivity analyses, natural log transformations of debt produced similar results. We report unlogged functions
here because they are easier to interpret. We also tested a debt-to-income ratio as an alternative measure of indebtedness.
We use total debt here instead because personal income for these young respondents has a highly skewed distribution, with
many making very little money, resulting in the ratio being erratic and unstable. For this age group, we expect that strati-
fying the results by social class background will better capture the differential effects of debt by alternative available re-
sources than a debt-to-current income ratio.
We define respondent class standing using parental household income because the class standing of young adults is best
represented by their social origins rather than by current income. While class, of course, involves more than income, we con-
sider income a good proxy for the class inequalities that we expect will lead to differences in the experience of debt. We sum
the income of the respondents’ mother and father (or mother’s current spouse or partner). We divide respondents into three
categories based on the position of parental income in the 2004 national income distribution, which we refer to as upper-
class origins if parental income was in the top quartile, middle-class origins if in the middle two quartiles, and lower-class
origins if in the bottom quartile. We conducted sensitivity analyses including the young adult’s personal income in the mod-
els, but it was not significant and did not affect other results and so we omit it from the final models reported.
We use Ordinary Least Squares regression to examine the relationships between mastery and self-esteem and indebted-
ness. In our first analysis class standing is an independent variable, and in the second, we run separate models for each social
class. We also report a supplemental analysis of age differences in the effects of debt. In all models, we include a series of
demographic controls for respondents’ gender, race, marital status and educational history. See Appendix A for descriptive
statistics on the variables included in the analysis.

6. Results

The results are more supportive of Hypothesis 1 that for this young cohort debt is experienced positively in a manner that
supports mastery and self-esteem rather than as a financial stress that degrades a positive self-concept as predicted by
Hypothesis 2. For both educational and credit-card debt, we find that class position significantly differentiates the influence
of debt on mastery and esteem. In all models, these effects are net of prior mastery and self-esteem, which are usually pos-
itively associated with current self-concept, but do not swamp the effect of debt. These controls are important because there
is a large stable component to self-concept (Reynolds et al., 2007). We begin by discussing the results for all respondents
combined and then move to the analysis by class. We then consider the possibility that the positive effects we find attenuate
over time through an additional analysis differentiated by age.

6.1. All respondents

Table 2 reports the effects of debt holding on mastery and self-esteem for all respondents, controlling for other key fac-
tors. The results show that increasing amounts of college loan debt significantly increase self-esteem. In supplemental anal-
yses restricting the sample to only respondents who have ever attended college, we find the same effects, supporting the
argument that the positive effects of debt on self-concept are above and beyond the positive effects of attending college.
Hypothesis 1 that debt improves mastery and self-esteem therefore receives support for the case of education debt. This rela-
tionship supports interpretations that education loans are perceived as investments in the future, improving self-concept.
Hypothesis 2 that the burden of accruing and paying back educational loans negatively affects self-concept is not supported
for these young adults.
Larger amounts of credit-card debt also increase mastery, and holding any credit-card debt increases self-esteem. These
results provide further support for Hypothesis 1, suggesting that young holders of debt do not experience the stress of repay-
ment in a way that erodes a sense of self-efficacy and self worth as expected in Hypothesis 2 – at least not yet. It may well be
that the material goods purchased with credit cards provide a sense of mastery and competence relative to the experience of
being unable to purchase these goods. In other words, even borrowed goods are better than privation.
These results suggest that carrying debt has broad effects across the population of debtors – effects not limited to the
more intense moment of financial crisis or bankruptcy. The moderate effect sizes are consistent with our expectation that
we are capturing the background effects of ordinary debt-holding rather than the crisis effects highlighted in prior research.
These broader effects have particularly important implications for the life course and socioeconomic mobility of the young
cohort who are our concern here. The impact of debt, however, is unevenly distributed across classes.
734 R.E. Dwyer et al. / Social Science Research 40 (2011) 727–741

Table 2
OLS regression of Debt on mastery and self-esteem.

Mastery Self-esteem
Debt holding
Having education debt .095 (.062) .071 (.062)
Total education debt (dollars) .001 (.060) .014* (.006)
Having credit-card debt .074 (.044) .135** (.044)
Total credit-card debt (dollars) .024** (.007) .006 (.007)
Parent’s social classa
Middle class parents .021 (.041) .037 (.041)
Upper class parents .209*** (.052) .138** (.051)
Prior self-concept
Prior mastery .107*** (.014)
Prior esteem .075*** (.010)
Demographic controls
Female .075* (.036) .137*** (.036)
Black .127** (.047) .259*** (.046)
Hispanic .150* (.063) .195** (.062)
Age .022** (.007) .039*** (.007)
Single .157** (.050) .116* (.050)
Has children .050** (.017) .036* (.017)
Ever attended collegeb .228*** (.043) .235*** (.042)
College graduateb .373** (.099) .297** (.098)
Intercept 5.736 6.049
R-squared 7.45% 7.63%
Model N 3079 3079

Notes: Standard errors in parentheses. Coefficients for continuous debt variables have
been multiplied by 1000 for ease of presentation.
a
The comparison category for parent’s social class is ‘‘lower class.’’
b
The comparison category for ‘‘ever attended college’’ and ‘‘college graduate’’ is ‘‘high
school or less.’’
*
p < .05.
**
p < .01.
***
p < .001 (two-tailed).

6.2. Class analysis

Stratification of the debt analysis across class positions provides support for the expectation that the effects of debt will
vary by the family resources available to young adults, with a quite consistent pattern across both mastery and self-esteem
(see Table 3). The results show that the effects of both education and credit-card debt on mastery and esteem are strongest
for respondents with parental income in the bottom 25% of the distribution, as predicted in Hypothesis 3. There are more
significant effects for lower-class youth than for middle- and upper-class youth and the effects are similarly positive for
both mastery and esteem. Strikingly, the significant effects for lower-class youth are for the amount of debt held rather than
whether any debt is held, suggesting that lower-class origin youth taking on more debt may view their activities as guided
by purposive planning – like an investment – and not primarily a financial stress. Debt thus appears to play an important
role for lower-class youth with fewer family resources and worse labor market prospects than for their more advantaged
peers.
Effects of debt on mastery and self-esteem are also evidenced for middle-class youth, as anticipated by Hypothesis 4.
There are fewer significant factors than for the lower class but a broadly similar pattern emerges. Most importantly, whereas
the lower class shows effects for both education and credit-card debt, the middle class shows significant effects only for cred-
it-card debt. Holding any credit-card debt increases mastery and esteem and larger amounts of outstanding credit-card debt
increase mastery for middle-class youth. Educational loans may be so normative among middle-class college students that
they are assumed and taken as a matter of course (Espenshade and Radford, 2009), whereas they are more clearly considered
conscious investment choices for lower-class youth.1 Credit-card debt, on the other hand, appears to contribute to a positive
sense of control and self-worth among middle-class youth, just as for lower-class youth.
We also find strong support for Hypothesis 5, which predicts that the debt effects on self-concept will be blunted for
upper-class youth, who have the most resources and options. In fact, there are no significant effects of debt holding for
the upper-class origin youth. It is noteworthy that debt appears to have no effect only where other – often better – choices
and fallback positions are available. Conversely, it appears that the positive investment interpretation of debt is most salient
for those who have the fewest alternative means to achieve their goals.

1
For college graduates in the sample, 62.8% of middle-class origin respondents graduate holding educational debt, significantly higher than for graduates of
lower-class origin (50.1%) or those of upper-class origin (53.1%).
 R.E. Dwyer et al. / Social Science Research 40 (2011) 727–741 735

Table 3
OLS regression of debt on mastery and self-esteem by social class.

Mastery Self-esteem
Lower class Middle class Upper class Lower class Middle class Upper class
Debt holding
Having education debt .094 (.121) .090 (.088) .182 (.142) .088 (.116) .062 (.089) .105 (.142)
Total education debt (dollars) .039** (.014) .006 (.008) .010 (.012) .065*** (.014) .007 (.008) .001 (.012)
Having credit-card debt .107 (.080) .208*** (.063) .025 (.106) .088 (.116) .297*** (.064) .019 (.106)
Total credit-card debt (dollars) .057*** (.001) .025* (.011) .009 (.018) .048*** (.013) .006 (.011) .003 (.002)
Prior self-concept
Prior mastery .113*** (.022) .111*** (.020) .061 (.038)
Prior esteem .104*** (.015) .069*** (.015) .043 (.027)
Demographic controls
Female .024 (.058) .116* (.053) .037 (.091) .039 (.055) .203*** (.054) .100 (.091)
Black .072 (.064) .229*** (.068) .011 (.191) .259*** (.061) .339*** (.069) .127 (.191)
Hispanic .079 (.095) .223* (.089) .025 (.208) .218* (.091) *
.224 (.090) .078 (.208)
Age .028** (.011) .009 (.011) .033 (.023) .045*** (.011) *
.029 (.012) .056* (.025)
Single .113 (.080) .284*** (.074) .061 (.134) .183* (.077) **
.209 (.075) .124 (.134)
Has children .071** (.022) .015 (.028) .067 (.059) .025 (.021) .056 (.035) .044 (.059)
Ever attended collegea .293*** (.073) .234*** (.061) .093 (.110) .145* (.069) .246*** (.062) .257* (.110)
College graduatea .040 (.214) .288 (.155) .679*** (.187) .224 (.204) 0.368* (.156) .275 (.187)
Intercept 5.568 6.068 5.894 5.818 6.395 5.843
R-squared 8.51% 8.34% 6.04% 10.60% 9.63% 5.99%
N 1208 1409 462 1208 1409 462

Notes: Standard errors in parentheses. Coefficients for continuous debt variables have been multiplied by 1000 for ease of presentation.
a
The comparison category for ‘‘ever attended college’’ and ‘‘college graduate’’ is ‘‘high school or less.’’
*
p < .05.
**
p < .01.
***
p < .001 (two-tailed).

In summary, there are strikingly different effects of debt for youth from different class origins. Mastery and self-esteem
are buoyed by both education and credit-card debt for the lower class – those who have the least access to credit and the
fewest alternative resources. The middle class also gets a lift in their mastery and esteem from holding credit-card debt.
The upper class, however, is essentially unmoved by debt, with no effect on their self-concept. The impact of debt thus ap-
pears to vary by the amount of other resources available, which affects the relative value of debt as a means to achieve
investment or consumption goals.

6.3. Debt experiences and age – evolving perceptions

The finding that both education and credit-card debt elevate self-concept could be a time-limited phenomenon for these
young adults. Positive effects of debt may be experienced mainly as it is taken on and soon thereafter, as the consumption
enabled by the debt improves the quality of life. Over time, these positive effects may wear off as the burdens of carrying and
repaying the debt eclipse the pleasures of consumption, as predicted by Hypothesis 2. In fact, the scholarship on the negative
effects of debt emphasizes the stress of repayment as much as the stress of taking on debt. We can begin to assess this ques-
tion by examining differences in the effects of debt by age.
Table 4 presents the debt analysis stratified by age. We examine three age groups, corresponding to important stages in
the transition to adulthood (Mortimer, 2003): (1) the 6 years after high school at ages 18–24, when most who will complete
college do so; (2) the mid-twenties years from 25–27, which are post-college for graduates and an important time for job and
family transitions for all young adults; and finally (3) the group aged 28 and older who are likely completing the transition to
adulthood. These estimated models include the same controls as the earlier aggregate and class stratified models.
When we separate the results by age, we see that the two younger groups show significant positive effects of debt on
mastery and self-esteem just as in the prior analyses. Total credit-card debt elevates mastery for ages 18–24 and 25–27. Total
education debt and having credit-card debt positively affects self-esteem for the youngest group, and total education and
credit-card debt both raise self-esteem for ages 25–27.
In striking contrast, the group aged 28 and older exhibits a significant departure from the pattern for younger groups. For
the first time we see significant negative effects of debt: the total amount of education debt reduces the sense of mastery and
self-esteem in this older group. Having education debt is significantly positive for those aged 28 and older, indicating per-
sistence in the benefits of investment in a college degree. But as time passes the amount of education debt becomes a drag on
self-concept, consistent with our expectation that debt becomes more burdensome over time. Early in the life course – and
early in the process of accruing debt – young adults experience a lift to their self-concept from debt-based consumption, but
challenges to their self-concept arise as they move through the life course with significant financial liabilities.
736 R.E. Dwyer et al. / Social Science Research 40 (2011) 727–741

Table 4
OLS regression of debt on mastery and self-esteem by social class and age.

Mastery Self-esteem
Ages 18–24 Ages 25–27 Ages 28+ Ages 18–24 Ages 25–27 Ages 28+
Debt holding
Having education debt .011 (.073) .160 (.140) .858*** (.244) .008 (.071) .097 (.152) .775*** (.226)
Total education debt (dollars) .004 (.007) .009 (.014) .057* (.024) .020** (.006) .003* (.001) .006** (.002)
Having credit-card debt .120 (.052) .084 (.101) .212 (.179) .160** (.051) .135 (.110) .042 (.167)
Total credit-card debt (dollars) .006* (.001) .030* (.013) .007** (.002) .009 (.010) .028* (.014) .002 (.002)
Parent’s social classa
Middle class parents .004 (.047) .055 (.094) .081 (.160) .057 (.046) .017 (.102) .052 (.149)
Upper class parents .186** (.059) .380** (.122) .396 (.245) .195*** (.058) .035 (.133) .383 (.226)
Prior self-concept
Prior mastery .088*** (.014) .085 (.049) .205** (.064)
Prior esteem .052*** (.010) .082* (.037) .111** (.041)
Demographic controls
Female .093* (.041) .048 (.085) .126 (.146) .135*** (.040) .210* (.092) .241 (.136)
Black .147*** (.054) .145 (.104) .081 (.170) .298*** (.053) .272* (.114) .104 (.158)
Hispanic .155* (.072) .143 (.144) .176 (.264) .187** (.070) .187 (.156) .319 (.244)
Single .119 (.067) .108 (.093) .380* (.163) .197** (.066) .028 (.101) .141 (.151)
Has children .036 (.026) .026 (.029) .081 (.043) .005 (.026) .045 (.031) .047 (.040)
Ever attended collegeb .265*** (.048) .153 (.106) .018 (.237) .234*** (.047) .246* (.115) .062 (.219)
College graduateb .486*** (.122) .228 (.191) .442 (.502) .493*** (.119) .087 (.208) .212 (.466)
Intercept 6.285 6.263 6.191 7.047 7.012 7.156
R-squared 7.37% 8.95% 16.55% 8.25% 8.08% 11.67%
N 2222 597 260 2222 597 260

Notes: Standard errors in parentheses. Coefficients for continuous debt variables have been multiplied by 1000 for ease of presentation.
a
The comparison category for parent’s social class is ‘‘lower class.’’
b
The comparison category for ‘‘ever attended college’’ and ‘‘college graduate’’ is ‘‘high school or less.’’.
*
p < .05.
**
p < .01.
***
p < .001 (two-tailed).

It is revealing that the negative effect for this oldest group arises from the educational debt and not credit-card debt.
This may be a result of the sheer size of educational loans, which are much larger than most credit-card loans (see Table 1).
Education debt also cannot be discharged in a bankruptcy, unlike credit-card debt, which may increase the stress of car-
rying education debt (Sullivan et al., 2000). While education debt is an investment – and is experienced that way by this
oldest group – for those with larger debts, it increasingly becomes a burden. The measure of credit-card debt may also not
be as effective in testing the hypothesis that debt becomes more burdensome over time because the measure is not inher-
ently lagged like the measure of educational debt. For the oldest group, education loans were taken on in previous years,
whereas credit-card debt is the cumulative total in the current year. While some of the credit-card debt may have been
taken on in earlier years, some of it may be relatively new and the recent consumption it represents may still buoy
self-concepts.

7. Debt and self-concept in the transition to adulthood

We have asked how debt affects the sense of mastery and self-esteem for young people and drawn two competing
expectations for these effects from prior research on indebtedness. Our study of young adults in the crucial transition to
adulthood during an historic period of increasing indebtedness suggests that debt enhances mastery and self-esteem for
both educational and credit-card debt – at least in the earlier stages of the transition to adulthood. We observe positive
effects of debt especially for those from lower- and middle-class origins. Sometimes the positive effects of debt are asso-
ciated with having taken on any debt and sometimes they are associated with the amount of debt, but always the effect
is positive. At least in the experiences of the young people holding educational and credit-card debt early in the tran-
sition to adulthood, taking on debt is not experienced as improvident. Rather, the self-view of young adults as being
worthy human beings and having mastery of their circumstances is facilitated by debt. Conceptual approaches that
interpret youth debt as motivated by unplanned over-consumption are simply not supported by these findings – again,
in the view of those who currently hold the debt. If these young debtors felt they were improvident or had over-con-
sumed past a rational level, they would be more likely to report feeling undeserving and out of control, not worthy and
masterful. It is also possible that young adults are stressed about their finances, but still experience a boost to mastery
and self-esteem because of the consumption debt underwrites – like new parents who report being both stressed and
happy (Evenson and Simon, 2005). Up to a certain worrisome limit, the things money (even if borrowed) buys facilitate
 R.E. Dwyer et al. / Social Science Research 40 (2011) 727–741 737

a sense of empowerment. Conversely, the deprivations of doing without needed or desired goods or statuses can under-
mine self-esteem and a sense of being in control of one’s life.
Taking on credit card as well as educational debt for young people appears to be experienced as a reasonable and con-
sidered path to follow – in short, an investment of value. In taking on debt young people feel they are acting as informed
and considered agents in control of their own lives and decisions. In future research it will be important to examine various
uses of credit-card debt to understand in more detail why this debt is experienced as an investment, like educational loans. It
would also be useful to assess whether some uses of debt yield more positive dividends for self-concept than others, such as
educational loans for private versus public college or attempts to start a business versus spending to help secure paid
employment.
Young people from all classes take on educational and credit-card debt in the process of transitioning from their class
of origin to their class of destination, but the effects of debt differ depending on the availability of other family re-
sources. Those from the lower and middle classes appear to be empowered by taking on debt and the opportunity it
gives them for class reproduction or even upward mobility. Young people from upper-class origins are emotionally less
impacted by their debt – either positively or negatively. Young people from upper-class origins are less exposed to con-
sequences of debt because they have greater familial resources to cushion them from youthful indiscretions, from unan-
ticipated setbacks, and, more generally, to support the reproduction of their class position. Their life chances are simply
less dependent on debt. These findings should move us away from blaming or patronizing young people for shallow
over-consumption. Our findings also support theories stressing the fragility of the lower and middle classes at this time
in history (Gittleman and Joyce, 1999; Rytina, 2000). It is widely noted that transitions to adulthood are becoming
increasingly disorderly and uncertain as young people, especially those outside the upper classes, explore new, longer,
and sometimes risky strategies for class reproduction (Mortimer, 2003), including taking on debt. Whatever the mech-
anisms, the experience of going to college or acquiring the trappings of an upward oriented lifestyle—even through
debt—support a positive sense of self for young people of lower-class and middle-class origins that may be difficult
to attain otherwise.

7.1. Longer-term implications

Our finding that debt is experienced as a boost to one’s self-concept in the short term in no way implies that there
will not be long-term negative consequences of debt holding. Indeed, the results of the age analysis showing that the
oldest members of this cohort experience negative effects on self-concept from total educational debt suggest that
the positive emotional effects of debt may wear off over time. Young adults early in the transition to adulthood may
experience temporary gains in mastery and esteem in that honeymoon before the stress of repayment is fully felt later
in their life course. The longer-term effects of debt may have significant implications for debtors’ ability to make optimal
choices about their lives, and may undercut their later consumption and attainments (Reynolds et al., 2007). In fact, the
short-term positive effects of debt may very well contribute to worse long-term effects. This possibility is supported by
evidence on the cognitive disconnect between taking on debt and repaying it. A well established body of research in
marketing suggests that those who are offered large amounts of credit upgrade their expectation of lifetime earnings
based on this offering (Somon and Cheema, 2002). The core mechanism is basically an application of the cognitive con-
sistency principle – ‘‘if they lend me money, I must be a future high roller.’’ Such thinking may also help explain the
disconnect between deficit spending and the challenge of paying it back that has been argued to underwrite the debt
society more broadly (Manning, 2000; Ritzer, 1995). People may not make independent judgments on their likely future
earnings and then take on debt accordingly. Rather, they may be offered an amount of debt that may exceed their own
estimation of their earnings potential and then adjust their anticipated earnings upward in response. An important cor-
ollary is that young people are especially vulnerable to such misperceptions, simply on the basis of less accumulated
experience and information, and may thus experience an extended honeymoon period with taking on debt in which they
continue to accrue future liabilities (Hayhoe et al., 2000).
It is thus not inconceivable then that young people are taking on debt as a perceived necessary investment in their future,
but they may have grave difficulties repaying that debt all the same. Relatively high expectations based on parents’ attain-
ments (Kamenetz, 2006: 95) mixed with falling middle-class incomes (Karoly and Burtless, 1995) contribute to further pos-
sible discrepancies between what one has been led to expect by life (and by creditors) and an accurate estimate of one’s
probable lifetime earnings. The positive social psychological effects of debt may thus underwrite an extended borrowing
phase, leading to even worse long-term consequences.
Only the future will tell if young debtors are making reasonable decisions about incurring debt. These longer-term effects
are further complicated by the financial crisis that brought the credit boom to its end. Those entering this crisis period with
credit may be vulnerable to increased fees and interest rates by banks trying to shore up their losses as well as to employ-
ment loss and to extended search periods for finding new employment. Will the stress of repayment become more severe
and affect both self-concept and attainment processes? Many investments that looked good during the boom years have
soured. Were the positive self-concepts identified here in part a result of the exuberance of a period that has now faded?
Will young adults who enter the transition to adulthood during the credit boom have a permanently more sanguine view
of credit or will they be more deeply and keenly affected by the economic crisis that followed? The effects of debt can be
far more negative during a recession than during an expansionary period. It will also be important to assess whether legis-
738 R.E. Dwyer et al. / Social Science Research 40 (2011) 727–741

lative changes in 2009 will impact youth debt (Credit CARD Act of 2009). The protections put in place may lower future risks
for many young adults. Still the parental permission provisions expire early in the transition to adulthood, at age 21, and it is
unclear how closely many parents will monitor these accounts.
At the aggregate level, large numbers of young people acquiring debt as an investment in reproducing their class position
is a grand social experiment with an uncertain outcome. Entering adulthood with debt that can approach the equivalent of a
home mortgage already in tow may force less than optimal educational and career decisions (Kamenetz, 2006). Family for-
mation may be delayed (Warren and Tyagi, 2003). Those already carrying large debts may be deemed poor mortgage risks
(Sullivan et al., 2000). Future bumps in the road such as job loss, illness, or divorce may be more difficult to cushion with debt
if one is already maxed out (Sullivan et al., 2000; McCloud and Dwyer, 2011). The negative impact of debt on self-concept for
the oldest young adults was evidenced for total educational debt – the largest debt young adults typically incur and one that is
often still being repaid long after the college experience is over. These are important questions that should be answerable as
the National Longitudinal Surveys continue to collect data on this pivotal cohort during this important historical transition.
The current study establishes a baseline for effects that will continue to be shaped both by the unfolding life courses of these
young adults as well as by yet unforeseen historical events.
The implications for class analysis are similarly far-reaching. As scholars we must begin to conceptualize people’s place in
the class structure in terms not just of current earnings, but also in terms of debt, investment, and ultimately lifetime con-
sumption and accumulated wealth. Young people as purposive actors in society, as well as governments and lenders, have
already made this cognitive leap.

7.2. Limitations of the analysis

The analysis reported here represents a crucial early step in understanding how debt is experienced by the cohort of
young adults who have been most exposed to the new debt society. We have used the best data available to study important
questions about the experience of debt in the transition to adulthood, but as with all data sources, there are some important
limitations. The measures of debt are not as detailed as would be optimal and it would be especially useful to have richer
time series data on when debt is taken on, and how much is carried forward. We would also like to have detailed data on
terms and interest rates. Another limitation is that the cohort of young adults in the NLSY79-YA are still fairly young and
so the analysis of long-term effects is truncated. It is thus important to understand our study as an assessment of the early
experience of debt. The finding of many positive effects of debt on mastery and self-esteem suggest that young adults may be
encouraged to continue to take on even more debt by the delay in the onset of longer-term negative effects – at some risk to
their future well-being. The good news is that the NLSY79-YA cohort continues to be tracked and data to study these longer-
term effects will be forthcoming. The finding that negative effects of debt begin to emerge among the oldest respondents in
the sample suggests it will be very important to continue to follow the experience of debt among this crucial cohort of young
adults focusing not only on self-concept but also broader outcomes such as mental health, status attainment, and wealth
accrual.

8. Conclusions

Young people increasingly start their adulthood already carrying a burden of debt. We have sought to answer the ques-
tion of how debt affects youth self-concept in order to better understand the impact of the changing societal order of rising
indebtedness on the developing lives of the young adults most impacted by this change (Elder, 1994). A full answer to the
question of whether youth debt accrued during the transition to adulthood was a circumspect investment in the future or
poorly considered improvidence must await a future that is yet to be revealed in which the positive and negative returns to
current high levels of debt are fully realized. At this point, what we can say is that young debtors experience debt as empow-
ering – as increasing their sense of mastery and self-esteem and thus their sense of having prepared themselves to meet the
future – at least until the full requirements of repayment ensue.
Access to credit is still a problem for the poor, who might benefit from greater opportunities for college loans and other
forms of credit. But on a broader basis, it is worrisome that young people are being forced to borrow against an uncertain
future rather than receiving the education necessary for full participation in society as a forward looking investment by soci-
ety – an investment that could be made through increased college scholarships or a return to earlier levels of public subsidy
for colleges. Even if young people are optimistic about their debt, there are certainly reasons for caution. This caution is
underwritten by an awareness that people’s estimates of their likely level of future earnings is itself influenced by their read-
ing of ready credit as a positive signal about future earnings – leading to circular reasoning in which the only guaranteed
winner is the lender. But even this optimism for lenders may be suspect. The current credit crisis based on loose lending
practices in the home mortgage market suggests the possibility that difficulties in paying off excessive youth debt could
someday contribute to the next wave of financial retrenchment.
In spite of many cautionary signposts, young people appear to be more likely to see debt as investment rather than a bur-
den as they begin their transition to adulthood. It is regrettable that researchers do not have crystal balls and so cannot pro-
vide with absolute certainty what would be a very useful answer to the question of whether these young people are right.
Further information will be revealed as the current cohorts of young adults move through the lifecycle. Are their graduate
 R.E. Dwyer et al. / Social Science Research 40 (2011) 727–741 739

education and occupational choices constrained by debt (Schneider and Stevenson, 1999)? Are family formation and home
ownership delayed? Will mortgages be more difficult to obtain because of a preexisting debt burden? Does carrying debt
eventually translate into greater stress and anxiety – as already suggested by existing research – with potential negative
health consequences? And will economic shifts leave young people with debt burdens from more prosperous times that
are increasingly difficult to repay? These questions suggest it will be increasingly important for life course researchers to
pay more attention to the role of debt in transitions and status attainment, and to include a focus on class differences in
the role of debt in transition to adulthood.
More broadly, the sociological implications of the new debt society extend beyond the travails of the individuals caught
up in this transition and their behaviors, stresses, and adjustments. The debt society also has important implications for the
broader political economy of contemporary society. State and Federal policies that reduce tuition supports and substitute
college loans for affordable tuition all but guarantee that current generations of college graduates will enter the labor force
with significant, sometimes grinding, debt (Jacoby, 2002). Spiraling debt is thus not accidental or the result of a failure of
character by the current generation. The privatization of college loans and the windfall profits accruing to lenders charging
relatively high interest rates on loans that are guaranteed by the government and thus have limited risk is not an accident
either. It is a result that has been directly engineered by political appointees to Sallie Mae and other government lending
agencies that represented the interests of lenders over those of borrowers – including students (Schemo, 2007). These ac-
tions have implications for our nation as a whole, not just for young people, not the least of which is the privatization of what
are in fact societal-level problems and shortfalls and the furthering of a society that mortgages the future rather than pays
forward.

Acknowledgments

We would like to thank Kristi Williams for her useful advice on this project throughout its development. This material is
based on work supported by the National Science Foundation, Sociology Program Grant 0916199. Any opinions, findings, and
conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views
of the National Science Foundation.

Appendix A

See Table A1.

Table A1
Descriptive statistics for all respondents.

Mean or percent Standard deviation

Dependent variables
Mastery 6.828 1.005
Self-esteem 7.394 1.000
Independent variables
Having education debt 19.1% .038
Total education debt in dollars $1258 3576.58
Having credit-card debt 33.2% .464
Total credit-card debt in dollars $953 2395.26
Parent’s social class
Lower class parents 32.8% .488
Middle class parents 46.1% .357
Upper class parents 21.1% .498
Prior self-concept
Prior mastery 4.250 2.332
Prior esteem 6.188 1.363
Demographic controls
Female 48.6% .525
Black 20.4% .488
Hispanic 8.8% .420
Age 22.84 2.998
Single 82.2% .354
Has children 27.8% .528
Ever attended college 39.7% .482
College graduate 5.3% .216
N 3079
740 R.E. Dwyer et al. / Social Science Research 40 (2011) 727–741

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