Shielding Vulnerable Families: The Moderating Role of Public Benefits Programs on the Relationship between Household Debt and Child Behavioral Outcomes

Background and Purpose

Household debt is becoming an important issue in the United States, especially in the aftermath of the 2008 Great Recession. Many families lost their jobs, were forced to go bankrupt or seized, unable to bear their obligations and support their families. Despite the growing importance of debt for family finances, especially for low-income families, less research has addressed associations between debts and child well-being. Moreover, there is very limited research on how welfare benefits affect the development outcomes of children of low-income families with debts issues. To extend previous research, the purpose of the study is to assess the moderating effects of public benefits programs on the relationship between household debt issues and child developmental outcomes.

Methods

This study utilizes data from the 2017 and 2019 Panel Study of Income Dynamics (PSID) and its associated 2019 and 2020 Child Development Supplement (CDS). The sample is narrowed down to households with incomes below 200 percent of the federal poverty level (FPL) and children aged 6 to 12, resulting in a final sample of 541 children. Key variables included Behavior Problems Inventory (BPI), debt issues (secured debt/unsecured debt), and participation in Supplemental Nutrition Assistance Program (SNAP) or Medicaid. Covariates used in this study included caregiver characteristics (i.e., age, race, employment status, education, residential area), child characteristics (i.e., gender, age). Descriptive and bivariate analyses were conducted using Stata 17.0.

Results

The analysis was conducted with Chi-square tests and t-tests to compare families with secured versus unsecured debts. Subsequently, multiple regression analyses were conducted to explore the impact of unsecured household debt on child behavioral problems, while controlling for socioeconomic variables. Notably, unsecured debt was shown as a significant positive predictor of adverse behavioral outcomes in children. It was also observed that parents with unsecured debt tended to have lower levels of education and were more likely to be unmarried. Even after adjusting for socio-economic factors, children of parents with secured debt consistently exhibited lower Behavioral Problem Inventory (BPI) scores compared to those from households with unsecured debt. However, the positive association between parental unsecured debt and children’s BPI scores remained evident. Furthermore, the influence of participation in programs such as SNAP and Medicaid on behavioral outcomes varied depending on the type of parental debt, with a stronger mitigating effect observed for children of parents burdened with unsecured debt.

Conclusion and Implications

The study provides evidence that public benefits programs may help buffer, lessening the negative effects of parental unsecured debt on children’s behavioral outcomes. Notably, the significantly greater effect size of program participation in households with unsecured debt compared to those with secured debt implied the potential significance of this variable, particularly for families struggling with specific debt types. Future studies with larger sample sizes should examine the role of public benefit program participation in mitigating the effects of different debt categories on family well-being, offering valuable insights for policymakers and practitioners working to support vulnerable families.