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Researcher On School Debt’s Link To Poor Health Will Focus On Minority Disparities, Other Debt Types In New Study

A researcher who released a study linking financial debt to poor physical and mental health in June will focus on its impact on both minority medical disparities and other forms aside from student loans such as auto loan, credit cards and personal consumer debt, mortgage and home equity debt.

Elizabeth Sweet, PhD, biocultural anthropologist who researches economic and racial disparities and health and assistant professor of anthropology at Northwestern University in Evanston, Illinois, a northern suburb of Chicago, revealed in a health blogspot on the Robert Wood Johnson Foundation’s website that she would expand her research, the findings of which appeared in the Social Science and Medicine journal this month (August 2014), to include minority disparities and forms of debt other than student loan debt. (The blogspot can be accessed at http://www.rwjf.org/en/blogs/human-capital-blog.html)

Sweet was a former Health & Society Scholars program participant, a philanthropic program created by the foundation to develop and nurture young scientists in their careers.

Sweet’s article on her research discoveries is titled “The High Price of Debt: Household Financial Debt and Its Impact on Mental and Physical Health.” Her research was highlighted in a Time magazine article two months ago on the effect of debt on human health. Her journal article is co-authored by fellow researchers A. Nandi, K. Adam and T.W. McDade. (The study can be accessed at http://www.ncbi.nlm.nih.gov/pubmed/23849243. )

For 15 years, the National Longitudinal Study of Adolescent Health, which was used, analyzed the conditions of debt and health in its subjects. It surveyed 8,400 youth, ages 24 to 32 years. (This can be accessed at http://www.cpc.unc.edu/projects/addhealth.)

The study found that individuals in debt are most likely to suffer “perceived psychological health stress and depression, worse self-reported health overall health and higher diastolic blood pressure.”

The Northwestern University scientists maintained that the findings are important as the study is controlled for “prior socioeconomic status, psychological health, physical health and other factors” of the human subjects studied.

Psychological issues connected with debt led to health problems such as poor dietary changes, low physical activity and drug abuse. They also caused blood pressure, cardiovascular and metabolic conditions.

To follow up on the study, Sweet told the foundation that she plans to collaborate with the other co-authors at Northwestern University on a research grant from the federal National Institute on Minority Health and Health Disparities to examine the health consequences of debt in more detail.

She stated that the team will use national, longitudinal data from the Panel Study of Income Dynamics to track the effects of debt, race and socioeconomic status on health overtime.

She added that investigators will also perform a “mixed-methods” community-based study reflecting how different forms of debt may affect mental, cardiovascular and metabolic health differently. As an example, Sweet hopes to explore real-world minority disparity questions such as the effects of high-interest payday loans on blood pressure as compared with that of mortgage loans.

Sweet explained that her work prior to the student loan debt study showed the importance of “symbolic capital” and “consumption-based status markers” in medical inequality by race, especially in the absence of socioeconomic resources for its sufferers. By interpretation, low-income persons who purchase and use goods associated with high social status suffer higher blood pressure and worse health.

She remarked that her work on symbolic capital or consumption-based status markers made no linkages to debt but the study stimulated her to think about the role of debt in “competitive consumption” or the practice of individuals in making purchases and taking actions that enable them to compete with peers on a higher socioeconomic level.

Sweet found her work — as that of other or past investigators — points to the prevalence of racial inequality and discriminatory practices in virtually every aspect of life, including in the area of financial health: racial and ethnic minorities are highly likely to be denied financing and are subject to disagreeable loan terms such as higher interest rates and their low- to moderate-income communities are most likely to host predatory lenders, hence the connection between financial debt and poor health.

Status of Student, Consumer Debt For All Fields of Study

As widely reported in March 2012 by the U.S. Department of Education, the nation shoulders $1 trillion in outstanding student loan debt. Experts say that the debt burdens the national economy, limiting college graduates from buying cars, taking out mortgages or spending money to stimulate business activity. (The figure and research may be accessed at http://www2.ed.gov/about/overview/fed/role.html’)

The Education department found that the average student debt is $29,400. Its research added that the number of students defaulting on loans is 10 percent, which is the highest rate in two decades.

Federal research further showed that, since 1980, debt has tripled. Between 1989 and 2006, consumer credit card debt rose from $211 billion to $876 billion and the percentage of indebted households carrying at least $10,000 in credit card debt rose from 3 percent to 27 percent.

Foreclosure rates are five times higher than 1979. Personal debt and home foreclosures lead to depression, stress, overall poor mental health and suicidal tendencies.

The Federal Reserve Bank of New York reported that student loan debt surpasses that of auto loans, credit cards and mortgage debt, making it the second largest form, following mortgages. (The study may be accessed at http://www.newyorkfed.org/studentloandebt/)

The bank found that the percentage of 25-year-olds with student debt has increased from just 25 percent in 2003 to 43 percent in 2012. Their average student loan balance grew by 91 percent from $10,649 in 2003 to $20,326 in 2012. As a result, the number of student loan delinquencies accumulated overtime.

Aside from personal and student loan debt, the National Association of Realtors found that the average age for first home purchases has been 30 years of age. (The study may be accessed at http://www.realtor.org/videos/is-student-debt-impacting-the-housing-market)

One-third of Americans own their homes yet this is only true of a minority of young homeowners, the association added.

Homeownership rates between 2003 and 2009 were higher for 30-year-olds with student debt than for those without debt. Debt holders have higher levels of education on average and higher incomes.

The homeownership gap between student debt holders and those not in this category widened during the housing boom of the first decade of the millennium.

By 2008, the gap reached four percentage points or almost 14 percent of the nonstudent debtors’ rate. Among 30-year-olds, rates dropped by 5 percentage points.

Moreover, rates among 30-year-olds with student debt fell by over 10 percent.

By 2012, the rate for student debtors was almost 2 percentage points lower than that of nonstudent debtors.

As a consequence, the association found, for the first time in 10 years, 30-year-olds with no student loan debt are more likely to have mortgage-related debt than those with no such burden.

While auto debt is less reliable for accounting for auto ownership than mortgage-related debt is for homeownership as young people may inherit or buy older vehicles, auto ownership parrots homeownership.

About a 3- to 4-percent gap exists between the auto debt rate of those with and those without past student debt. Namely, throughout the housing boom, individuals with student debt were more likely to take out loans to buy cars.

While both groups were found not to use loans as much to buy cars from 2008 to 2012, the incidence of loan-based auto purchases dropped more sharply for individuals with student debt.

In 2011, the association stated, both trends met and, by the final quarter of 2012, those with student debt were less likely to hold auto debt than those without it. Two reasons may account for this recent social phenomenon.

Firstly, since the onset of the Great Recession, the growth of consumer debt may have forced college graduates to envision bleak income prospects. Their lack of participation in the housing and auto loan markets may be part of an overall disinterest in consumption.

Secondly, persons with student debt may not meet the strict debt-to-income (DITI) standards set by lenders who have rendered underwriting policies more rigid in consumer debt markets. This is especially since delinquency in repayment of student loans has become more prevalent among this cohort.

Mark Kantrowitz, a national expert on student financial aid, scholarships and student loans and senior vice president and publisher of Edvisors.com, a portal devoted to providing advice on scholarships, grants and loans to students and graduates, said in the only interview granted to this writer for this article that the majority of student expenses lie in college tuition.

Kantrowitz serves on the editorial board of the Journal of Student Financial Aid and the editorial advisory board of Bottom Line/Personal, a likeminded publication. He is also a board member of the board of trustees of the Center for Excellence in Education and of the National Scholarship Providers Association.

“About half of college costs are in tuition and half in other expenses, for undergraduate [students],” he said. “For graduate school, there may be higher tuition rates.”

Brookings Institution Study Disputes Findings

The Brown Center on Education Policy at the Brookings Institution, too, called into question the approach to the study, particularly its target of the incorrect student demographic — mainly, nontraditionally-aged college graduates over the age of 24 as opposed to traditionally-aged alumni (aged 18 to 24) — and the true extent of student loan debt’s bearing on the nation’s economy.

The center itself released research showing that, in the last two decades, the amount of their income that young adults are devoting to loan repayment has stayed stable and has not ballooned to crisis proportions.

Rather, the Brookings researchers — and their supporters — observe that those not in the traditional college-age group are more likely driving much of the student loan debt trend in the second decade of the millennium as its members are returning to school en masse to retool themselves for a struggling but changing economy and taking out loans in the process to finance their education.

Researchers Beth Akers and Matthew M. Chingo set forth in the Brookings Institute report, “Is A Student Loan Crisis On the Horizon?” — also released in June — that only 7 percent of young adult households with school debt have $50,000 or more of it.

By contrast, the report establishes that 58 percent have less than $10,000 in debt and another 18 percent have between $10,000 and $20,000. These traditionally-aged college graduates have bachelor’s or master’s degrees.

As a result, the young graduates are not making a dent in the economy with student loan debt, researchers concluded. Rather, those who are returning to school in reaction to the struggling economy and ones who can’t finish college but still end up in debt account for the greater part of the student loan crisis.

The center finds that, in 2010, about 36 percent of households with individuals aged 20 and 40 had school debt, up from 14 percent in 1989. Within that period, the average amount of debt nearly doubled to $8,500 from $3,517 after adjusting for inflation.

Researchers also conclude that part of the problem involves colleges graduating fewer than half of the students enrolled and challenging policymakers’ attempts to make them accountable for their results and the practice of some public colleges and universities devoting much of their financial aid to students who do not need it. Additionally, recent state budget cuts caused tuition increases, factoring into the student debt problem.

Kantrowitz also questioned the study.

“Note that correlation is not necessarily proof of causation, even with a close-response relationship,” he said of the study. “Much of the results could also be explained by people who have problems being more likely to borrow more. To prove it one way or the other, they would need to measure a baseline prior to enrollment in college and compare the change in the metrics relative to the baseline and correlate it with the amount of debt.

“The problem with the study referenced in Bloomberg is that it focuses on total debt out of context. It is more important to consider debt-to-income ratios. A medical school graduate who has $200,000 in debt may not be in such a bad situation if his annual income is $400,000.”

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Last updated August 2014

Vladimire Herard, M.S. (99 Posts)

A print journalist for 21 years, Vladimire Herard freelanced for the National Senior Living Providers Network, (nslpn.com), the Guidance Channel and Longtermcare.com. Under CD Publications, Ms. Herard wrote about senior health, substance abuse prevention, and elderly housing. Under Inside Washington Publishers, she covered health care financing for Inside HCFA and food and product safety issues for FDAWeek. Ms. Herard also covered education, crime, and county affairs for daily newspapers such as the Chicago Defender. She currently covers senior long-term care, the pharmaceutical industry and issues and education. Ms. Herard resides in Chicago.


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