Repeated payment delinquency among young adults in the United States

Abstract

There is concern in the United States about young adults falling behind financially due to the increased use of student loans and low wages. This study investigates payment delinquency as a measure of financial distress to better understand how young adults might be struggling. Personality traits are incorporated into the model to determine the extent to which behavioural factors are correlated with financial behaviors and if they predict a habit trend of payment delinquency. The 1997 National Longitudinal Survey of Youth, a nationally representative longitudinal data set, is used in the study. A random effects probit model and a dynamic random effects probit model are used to examine late bill pay (harassed by bill collectors) and late rent or mortgage payments (more than 60 days late) over a period of 8 years (2007–2015). Results from the analysis indicate that payment delinquency in a previous period increases the likelihood of payment delinquency by 10 percentage points in a subsequent period. Conscientiousness decreases the likelihood by 2.1 percentage points, while neuroticism increases the likelihood by 1.6 percentage points.

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