What Shapes the Way We Borrow: Parental Debt or Behavior Problems?

This paper investigates the role of behavioral problems and parental debt in credit card and student loan use among young adults. The results show that behavior problems do not predict credit card ownership, carryover balances, and a high level of indebtedness. Higher behavior problem scores are linked to a decrease in the probability of having student loans and in the student loan balance. The results also show that parents’ use of unsecured debt influences young adults’ financial behavior. When parents have unsecured debt, the likelihood of having credit cards, carryover balances, and the balances on these credit cards are higher for young adults. The results show an even stronger, positive effect when student loans are considered.