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.