Tuesday, July 26, 2011

Debt is “cool”? Huh? (Huh?)

As if this past year’s hoo-hah over football players trading shoulder pads for discounts on tattoos wasn’t quite enough news coming out of Ohio State, now comes an OSU report that:

… found that many young adults think debt is a good thing. They feel a boost to their self-esteem from carrying credit card and education debt. (Source: Boston.com article entitled ‘Some young adults think debt is cool.’)

And here I was thinking that the rising generation was going to be all kinds of prudent, and learn from the mistakes of the feckless, mortgaged to the hilt hordes who came before them.

Not that debt is all evil, all the time. But “debt is a good thing”?

Holy Moly! (Good-bye, Columbus!)

I made my ‘say it isn’t so’ way over to the OSU Research News site, and there it was again:

Instead of feeling stressed by the money they owe, many young adults actually feel empowered by their credit card and education debts, according to a new nationwide study.

Researchers found that the more credit card and college loan debt held by young adults aged 18 to 27, the higher their self-esteem and the more they felt like they were in control of their lives.  The effect was strongest among those in the lowest economic class.

I have a lot of sympathy for kids coming out of college up to their eyeballs -  and beyond -  in debt, facing a terrible job market. I feel especially bad for the ones who borrowed $50K a year to pursue their “passion” – a major in interpretive basket weavery – rather than studying something completely practical (electronics engineering) or at least of marginal utility in the work world (psychology). Yes, it was their own damned ill-advised faults. But they were so young and vulnerable. And now they’re out their with a mortgage-sized sack of debt. And they don’t even own the house when they pay it down.

But feeling empowered, feeling good about that sack of debt. Talk about one more downside aspect of the self-esteem generation.

What I find most troubling here, however, is the note that “the effect was strongest among those in the lowest economic class.”

Sadly, I can see how a kid from a poor background might naively interpret a college’s or bank’s willingness to let them take on all kind of student loans, and a whole bunch of credit cards “awarding” them $5K credit limits as a sign of faith in their potential.  Hey, these guys must think I’ve got what it takes if they’re willing to forward me this kind of cash.

And there’s nothing wrong with investing in yourself.

Certainly, taking out a “modest” amount of debt to fund your own education should be worthwhile. But when that debt goes much beyond $5K per year for four years, it can become crippling pretty darned fast, especially if you’re not in an especially lucrative field.

Credit card debt, by the way, makes middle class kids get all smiley face.

Those in the middle class didn’t see any impact on their self-esteem and mastery by holding educational debt, perhaps because it is so common among their peers that it is seen as normal.  But they did see boosts from holding credit-card debt – the more debt, the more positive effects.

Rolling up credit card debt while in college so that you can let the good times roll. Gasp! I do not have sufficient imagination to understand how having credit card debt can yield any positive effects. I’m the old-fashioned crank type: How about you forego the new iPad or that Kate Spade bag?

The young folks bearing so much debt – smart debt, stupid debt – are eventually going to figure out that paying it down stinks, and can relegate you to living in some dump with a kazillion roommates – or back with your folks – with little money to spend on the discretionary stuff that folks in their twenties should be focusing on: going out with friends, traveling, buying a new couch.

It’s no surprise that:

Only the oldest of those studied – those aged 28 to 34 – began showing signs of stress about the money they owed.

Yep. Now that they’re settling down, they’re realizing just what a bad bargain some of that debt might have been.


Here’s an earlier post on a college student taking on some really stupid debt.

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