Family Debt as Investment in Young Adult Children

• In Event: 212 - Section on Inequality, Poverty and Mobility Roundtables (one-hour)
  In Refereed Roundtable: Section on Inequality, Poverty and Mobility Roundtables (one-hour). Table 01. Family and Inequality

Abstract

One result of the democratization of credit is that consumer loans, particularly credit card loans, became available to the majority of American households. Despite the salience of this financial resource, stratification researchers have yet to conceptualize consumer credit as a valuable resource parents use to facilitate children’s status attainment. Using data from the 1979 Cohort and the Young Adults sample of the National Longitudinal Surveys of Youth, I explore how parents’ histories of indebtedness influence status attainment in their young adult children. I find that young adults largely advantage from their parents’ consumer debt during early adulthood. The children of parents who historically carry high consumer balances are more likely to enroll in college and graduate with a Bachelor’s degree. Conversely, I find that young adults whose parents do not carry consumer debt over time are significantly less likely to enroll in or graduate from college. While I find young adults benefit by having parents who historically carry high consumer debt balances, I am hesitant to conclude that the influence is overwhelmingly advantageous. Because the young adult children of high debt parents are more likely to amass high debts themselves, the advantages they see in early adulthood from their parents’ consumer debt use may be jeopardized by having to repay their own debts in later life.

Author

• Laura McCloud, Pacific Lutheran University