Debt personalities revealed in student borrower poll

The secret to why some people drag debt with them forever and others use it for a financial boost has been revealed in a personality study by a former Canterbury University student.

As part of his post-graduate honours research, Joseph Barnao canvassed university students' attitudes to debt and over the course of the year found they fitted four personality categories.

The "life indebted" paid the minimum amount possible off their student debt and tended to live beyond their means. "Traditionalists" were financially responsible and believed student debt had given them a leg-up towards a good career; the "Entrepreneurs" knew how to get money to work for them and chose to leave their loans while they invested elsewhere, and the "expedient payees" dramatically increased their payments so they could pay off their student loans quickly.

Mr Barnao said the research showed how people would deal with debt beyond university.

"This sample comes from university students, who are usually educated and you would hope could make informed decisions, so you can extrapolate this to their debt behaviours within society in general," he said.

He said student loans could be a good thing for the economy as they helped people improve their skills, but his research showed it was far too easy for students to get into debt and to develop dangerous attitudes towards debt.

"When you are 17 or 18 you are quite overcome and just sign up to university because it's the done thing to do, and you probably don't realise how quickly money can lump up," he said.

In interviews the "life indebted" acknowledge that having a student loan was unpleasant, created extra stress, and was something they were always thinking about.

One 23-year-old arts student said it would take her about 20 years to pay off her student loan.

"It is frustrating. The frustration is knowing how much money you are wasting and the frustration of how to plan to pay it back," she said.

Mr Barnao did not think the recession would change attitudes.

"If someone offers you $100 you will take it, won't you," he said.

Although Mr Barnao did the research five years ago, it was only recently placed on the Clute Institute's international journal, and has been referenced at seminars around the world.

It was timely to release it now because while debt behaviour was unlikely to change, those who struggled to manage debt were increasingly worse off.

He believed student loan repayment incentives such as the interest-free scheme and the suggested repayment bonus scheme tabled in Parliament last week would do little to help the "life indebted" repay their loans.