A new study has a whole different take on what debt relief means.
Getting rid of debt doesn’t just unburden finances, it takes a weight off the mind that clears up cognitive functioning, lessens anxiety and improves impulse control.
The findings come from researchers at the National University of Singapore’s Social Service Research Centre, who studied almost 200 low-income people who unexpectedly had portions of their long-running mortgage, utility and municipal debts paid down by a charity.
Researchers tested participants before and after their windfalls on their ability to spot matches and mismatches. The recipients were also tested for generalized anxiety disorder and their ability to make more beneficial financial decisions.
The study found:
• Average error rates in the cognitive function tests fell to 4% after the debt was paid down, compared to a 17% error rate beforehand.
• The proportion of participants showing generalized anxiety disorders went from 78% to 53% after the debt relief.
• Numbers of people showing so-called “present bias,” which favors instant gratification, dropped to 33% from 44%, a sign that their impulse control had improved.
‘Because debt impairs psychological functioning and decision-making, it would be extremely challenging for even the motivated and talented to escape poverty.’