Family Background and Young Adults Economic Well-Being: Debt and Homeownership

Background: The context within which contemporary young adults are transitioning into adulthood is characterized by an escalation in household indebtedness (Montgomerie, 2013). Young adults (18–34 years) are growing up in a structural context in which natal families are accustomed to heavy reliance on debt for their asset accumulation on big ticket items such as homes, automobiles and education expenses, as well as, routine living expenses to meet basic household needs (Fry, 2014; Montgomerie, 2013). Therefore, young adults from different socioeconomic backgrounds have different capacities and knowledge on how to go about accumulating debt and assets. This study seeks to examine how a latent family capital construct could be used to examine the age-25 debt levels and home ownership for a contemporary cohort of young adults, while also accounting for select demographic characteristics, milestones associated with adulthood, and educational achievement including student loans?

 

Methods: This paper used the National Longitudinal Survey of Youth 1997, up to the 14^th Wave (2010). The paper only used a sub-sample (N2734), young adults who were at a risk of assuming educational debt. Measures for this study consisted of the Latent Family Capital construct (4-Factors) identified from 15 select measures of family resources and processes. The 1^st Factor captured Parental Involvement, the 2^nd Factor captured Economic Capital, the 3^rd Factor captured Social Networks, and the 4^th Factor captured Closeness-to-Parental Figures. Outcome variables include debt at Age-25 (excluding mortgage and student loans), and Age-25 Homeownership. Multiple regression is used to assess the relative effects of family capital, educational achievement and educational debt on age-25 outstanding debt. Binary logistic regression is used to assess the relative effect of the predictors on age-25 homeownership status.

 

Results: The sample age range was 26 to 29 years with a mean age of 27 years. The average student loan debt was $10,799 (SD= $12,704), with a median of $7,000. The sequential OLS regression estimation revealed that the SES factor is significant and negatively associated with logged age-25 debt only when accounting for education achievement and loans. Race and sex are significant predictors of logged age-25 debt. The latent family capital predictors could not predict age-25 young adults’ homeownership. However, race and sex were significantly associated with age- 25 home ownership. Also, holding other debt at age 25 was positively associated with age-25 home ownership status. Those with education loans of between $10,000 and $20,000 are 1.79 times (80%) more likely to be home owners than their peers with student loans of over $20,000. Those cohabiting are 76% more likely to be home owners than their young adult counterparts who are single and not cohabiting.

 

Conclusion: These findings suggests that policy makers and practitioners can help low-income and minority households understand how the structural context, a political-economy characterized by household indebtedness, shapes household well-being and family processes that influence young adults’ achievement.