Debt and Subjective Well-being: The Other Side of the Income-Happiness Coin

Abstract

To spur research on the topic of debt and its consequences, we conducted a systematic review to integrate the different conceptualizations of debt and to develop a conceptual model explaining mechanisms through which debt influences subjective well-being (SWB). Our conceptual model weaves two common themes from the prior literature: (a) a bottom-up spillover perspective where debt affects SWB via the financial domain (and possibly other life domains that are negatively affected through spillover); and (b) a resource perspective wherein debt is a strain on financial resources which, in turn, lowers SWB. Further, we review past empirical studies assessing the linkage between debt and SWB. A majority of associations (90 %), from 20 studies, revealed at least one significant negative effect between debt and SWB. Further, a random effects meta-analysis of seven studies showed a small relationship between debt and SWB (r = −.07), although there also appear to be critical moderators such as levels of debt, source of debt, and overall financial resources. To test our conceptual model, we conduct a moderated mediation analysis of a large scale representative sample of college graduates with Internet access in the United States (N = 2781) to examine the effects of student loans on SWB. Debt and income accounted for 40 and 60 % of the predicted variance of life satisfaction, respectively. In addition, the bottom-up perspective and resource perspectives were supported. One critical limitation is that there are not many studies on debt and SWB. Future areas for research are discussed.