Skip to content
Link copied to clipboard

Personal Finance: Research links debt, depression

Does debt nag at you and make you miserable? A researcher has put a number to the emotions, quantifying how debt drags people down.

Does debt nag at you and make you miserable? A researcher has put a number to the emotions, quantifying how debt drags people down.

Lawrence Berger, a University of Wisconsin-Madison associate professor of social work, has found that when the dollar amount of a person's debt increases by 10 percent, depressive symptoms - such as not being able to shake the blues or having trouble eating or sleeping - increase by 14 percent.

Still, if you are young and have debt that you won't have to pay off for many years, you might be able to shrug it off.

Cruel debt. The debt that brings people down tends to be short-term debt, such as credit cards or payday loans that can snowball. And it especially weighs on people ages 51 to 64, Berger said.

That isn't surprising. They're in the period of life when the clock is running - when retirement is nearing, when health or age discrimination might make it difficult to get or keep a job, and when the common illusion that somehow money will materialize starts to evaporate.

In a study of retirement confidence by the Employee Benefit Research Institute, researchers found that half of current retirees left their jobs before they intended to because of health or downsizing.

About 45 percent of workers with major debt said they "were not at all confident" that they would be able to retire, the study said, and 5 percent of retired people were concerned they wouldn't be able to pay their debts.

Young adults, on the other hand, have time ahead of them. Even with large levels of debt, they can imagine tackling it with the next job or the next phase of good luck.

Still, the Employee Benefit Research Institute found that many people who might have assumed at a younger age that they would get their debts paid off by retirement ended up in retirement with debt. Since the 1970s, debt levels in retirement have gone up 77 percent.

Long vs. short. While people close to retirement might be the most depressed, Berger said, recent college graduates might be more troubled by long-term debt, such as student loans, than the group he studied.

For his research, he used data on 4,755 individuals from 1987 to 1989 and 1992 and 1994 in the National Survey of Families and Households.

At the time, student loans weren't as oppressive. And people with mortgages might not have worried then because house prices seemed likely to rise over time, he said.

Now, realities have changed. And after quantifying the fact that debt does result in depressive symptoms, but not clinical depression, Berger and other researchers are examining more recent trends. One question, he said, is what the effect might be on families.

For example, researcher Fenaba Addo of the University of Wisconsin-Madison has found that women with significant debt tend to remain single. Researchers at Demos, a think tank, have found people in their 20s with a lot of debt delay marriage and children.

A 2009 study by Paola Giuliano and Antonio Spilimbergo, published by the National Bureau of Economic Research, found that lifelong beliefs are altered when people ages 18 to 25 live through recessions. They tend to think success depends more on luck than their own efforts. And they are most affected if they lost their jobs in the recession.