Posted by André Nosalsky :: July 27, 2007 @ 9:53 amRecently with so much discussion going on about college debt, I wanted to see if there was any scientific research on factors that might affect the amount of debt a person is carrying. I came across a study published in 2006 that sheds some light on this matter. This study was published in the Journal of Applied Social Psychology (Vol 36(6) (Jun 2006), pages 1395-1413). It surveyed 448 students from five colleges in three states.
Financial Literacy – In the study, financial literacy was one of the most important predictors of debt. Researchers, using the JumpStart Scale, found the more financial know-how you have, the less likely you will have credit card debt. Surprisingly, the researchers also found that college students were not better informed about finances than high school students. Solution: Increase your financial literacy by reading blogs like this Lending Club blog.
Number of Credit cards – The researchers also found that the more credit cards you have the more likely you are to be in debt. Even if you are financially literate and think debt is bad, the level of debt will be higher just because you have many credit cards available to you.
Solution: Carry only one credit card with you. Cut up or put away all of the other credit cards, depending on your situation.
Attitudes toward possessions and spending are also predictors of how much debt you will have. Being more careful about what you buy and where you spend your money can influence how much debt you have.
Solution: Think before buying something and putting the purchase on a credit card.
The study also found that women and men did not different in their debt habits. Age, as expected, did account for differences in behavior. Older students were better at debt management. Students were also found to be very optimistic about the ability to repay their debt and the future income they would generate. The research also determined that in general the students were all equal with regard to the debt risks that they face.
Ready for a money reality check? Take this challenge from the Jumpstart Coalition and see how you do!
1 Comment
Great job Andre!
The factors that you have cited are really the ones to be blamed why credit card debt among college students are very frequent. If only people would take the time to know more cost effective ways to avoid debt and if only they have the proper knowledge on how to use credit cards, then maybe there's lesser financial problems to take care of.
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