Debt, Credit Payment Holidays, and Their Relationship with Mental Health during the COVID-19 Pandemic in the United Kingdom

Abstract

Although the relationship between debt and mental health is well documented, little is known about how changes in debt status and the specific policies implemented to assist borrowers during the COVID-19 pandemic have impacted the mental health of men and women. Particular attention is paid to the implementation of a non-neoliberal “credit payment holiday” scheme during the pandemic in the United Kingdom. Data come from three waves of the Understanding Society COVID-19 surveys. We use panel data models to assess the relationship between change in the presence of unsecured debt, credit payment holiday, and psychological distress (12-item General Health Questionnaire [GHQ-12] Likert score), controlling for confounders. The presence of debt is associated with significantly higher psychological distress, and the pattern is particularly pronounced for women than for men. Among the indebted population, the results show that credit payment holiday can significantly buffer the negative mental health effect of debt. While the buffering effect is larger for women, it is not significantly different across genders. The relationship between debt and mental health remains significant throughout the pandemic, but the credit payment holiday scheme has played a significant role in attenuating it and could be implemented as a policy tool outside the pandemic context.

Examining the relationships between psychological distress and financial hardship and uncertainty during the COVID-19 pandemic and the subsequent cost-of-living crisis in the United Kingdom

“…We demonstrate that the COVID-19 pandemic was not associated with a drastic increase in financial hardship nor was it associated with a profound change in financial uncertainty among the UK population. In some way, the implementation of protective schemes such as the COVID-19 job retention scheme 22 and the credit holiday 23 might have contributed to protecting the UK population against greater financial distress. This is not true when it comes to the subsequent cost-of-living crisis.…”

“…Cohort 2 specifically includes waves collected over the recent period with waves 2020 and 2021 collected during the COVID-19 pandemic and wave 2022 collected at the start of the so-called cost-of-living crisis with a pre-pandemic baseline (data collection in wave 10 stopped at the early stage of the pandemic). We include all respondents aged 16 and over at each baseline with a sample 41,855 (28,291 after restriction to complete cases) respondents in cohort 1 and 33,588 (23,246) respondents in cohort 2.…”

“…For instance, the COVID-19 job retention scheme (furlough) has contributed to maintaining a large part of the population in employment, minimize unemployment during the pandemic and, consequently, protect workers' mental health 22 . Similarly, the Credit Holiday scheme was implemented for borrowers to be able to request a delay in repaying their financial or mortgage debts, resulting in mental health benefits among those who used the scheme 23 . Yet, whilst these interventions have mitigated the economic costs of the COVID-19 crisis and financial insecurity for (most) people, population mental health was drastically affected.…”

“…This resulted in better mental health levels among the furloughed population (though not as high as for those who kept working), higher compared with those who moved or remained in unemployment during the period (Wels et al, 2022). Similarly, the Credit Holiday scheme was implemented for borrowers to be able to request a delay in repaying their financial or mortgage debts, resulting in mental health benefits among those who used the scheme (Sparkes et al, 2023). Yet, whilst these interventions have mitigated the economic costs of the COVID-19 crisis and financial insecurity for (most) people, population mental health was drastically affected.…”

Adding financial insult to physical injury: Economic impacts of having COVID

“…For a number of reasons—including lack of generational wealth (partly because of structural racism and past discriminatory practices like redlining), higher student loan debt, and lower incomes—the financial health and credit scores for minority populations are lower at baseline 5,6 . Low credit scores further exacerbate financial disparities when disruptions occur to income, employment opportunities, housing, or other challenges.…”