Financial Debt and Mental Health of Young Adults

Abstract

The purpose of this study is to examine the debt burdens, perceived capabilities, and mental health of young adults. Panel data constructed from the 2009 to 2013 waves of the Panel Study of Income Dynamics (PSID) and its Transition to Adulthood (TA) supplement are used in this study. The multinomial logistic regression analysis findings showed that the amount of revolving debt was negatively associated with young adults’ mental health. On the other hand, perceived abilities in acting responsibly, in solving problems, and in managing money were positively associated with the mental health of young adults. The fixed effects regression analysis results indicate that the amounts of credit card and student loan debt from the previous period were negatively associated with an increase in the mental health continuum scores of young adults over time. A discussion of the implications of this study’s key findings for scholars, policymakers, and practitioners is included.