Access to credit may lead to increased opportunities for consumption and, thereby, improvements in wellbeing (at least in the short-term) by facilitating acquisition of material resources that may lessen the effects of limited income or adverse financial shocks and associated stress. At the same time, however, as debt must eventually be repaid, its accumulation may have adverse (potentially longer-term) consequences both directly, because resources must be expended on debt repayment, and indirectly, as a result of increased financial stress.

This study uses longitudinal data on approximately 9,000 households drawn from waves 1 (1987-1989) and 2 (1992-1994) of the National Survey of Families and Households (NSFH) and a series of fixed-effects regressions to estimate associations of particular types and levels of debt with adult depression, which is measured by the partial CES-D scale. Specifically, we investigate the role of changes in both absolute and relative (to income and wealth) amounts of short- (consumer debt in the form of credit card debt and bills owed for more than two months), medium- (installment loans, home improvement debt, vehicle loans, bank loans, and loans from friends), and long-term (mortgages and education loans) debt vis-à-vis adult changes in adult depression between the two survey waves. Our models adjust for time-varying measures of income, assets/wealth, family structure/marital status, education, employment, household composition (age and relationships of members), and physical health and disability. Preliminary results suggest that increased household debt is generally associated with increased adult depression. However, this association is primarily driven by short-term (consumer) debt rather than long-term (mortgage and education) debt -like mortgage debt.

Widespread concern over growth in household debt in the U.S., coupled with the recent mortgage crisis and recession, has prompted an array of federal and state regulatory reforms with regard to mortgages, subprime lending, and unsecured (particularly credit card) debt. By examining influences of both unsecured (consumer) debt (e.g., that is primarily accumulated in association with current consumption, and frequently via credit card purchases) and debt that is accrued as a result of asset or human capital investment (e.g., for educational advancement or durable assets that produce a flow of value, such as a home), this research will provide a comprehensive assessment of the ways that particular types and levels of debt may influence adult depression. Thus, this work has implications for the range of potential costs and benefits of financial regulations, as well as for understanding economic and non-economic consequences of debt for adults.