How Does Student Debt Impact Mental Health?

If you’re still paying off your student debt, you probably know the stress it can cause. Whether it’s living paycheck to paycheck, being unable to save much money for things you want (like a house) or knowing how much extra you’re paying in interest, being in debt is no fun.

Despite the fact that 43.6 million Americans have federal student loan debt as of 2023, not much research has been done showing how debt affects mental health. Until now. 

The deal with student debt and loan forgiveness 

First, a little bit of background. On average, borrowers have federal debt balances of around $37,000. There’s been a lot of chatter around student loan debt recently because in July 2023, the Biden Administration announced that it would be automatically forgiving $39 billion in student loan debt, which will affect 804,000 borrowers.

This ruling came soon after the Supreme Court struck down a forgiveness plan for $1.78 trillion that the Biden administration proposed in 2022. And it follows several years of loan payments being paused — with a 0% interest rate — during the pandemic. 

How does student debt impact stress levels? 

Kristen Lindgren, a clinical psychologist and professor in the University of Washington School of Medicine Department of Psychiatry and Behavioral Sciences, says she’s surprised more researchers aren’t asking questions about the mental health impacts of student loan debt. She was so surprised, in fact, that she decided to study it herself.

“I have undergraduates in my lab and we have been concerned for our students, because they talk about student debt often,” she says.

In 2022, she published her first study on the topic.

Lindgren and her team looked at the link between specific financial stressors and problematic alcohol behaviors, plus mental health conditions, in young adults. She followed 346 recent college graduates — nearly all of whom had exhibited problematic drinking behaviors in the past. All the participants were two years out from graduation.

“Many of these students face a double whammy of student debt and uncertainty. They’ve lived through the Great Recession of 2008, the pandemic, and widening income inequality. They’ve faced so much turbulence,” Lindgren says. “We wanted to understand their perspectives on their socioeconomic status and their debt.”

Many of the individuals Lindgren studied reported perceived economic instability, which turned out to be linked to problematic drinking behaviors and increased mental health symptoms. Higher student debt was correlated with higher stress.

It’s also worth noting that financial strain — whether it’s perceived or actual — has also been found in prior research to be linked to a higher likelihood of developing mental health conditions. In other words, the reality of the numbers doesn’t matter much when it comes to negative cognition; what’s more important is how someone feels about the stability, or lack thereof, of their financial situation.

Why alcohol? “Typically, we see people drinking in the context of stress as a way to cope,” Lindgren says. Young people may be turning to alcohol as a way to cope with financial stress. Previous research bears this out, showing that drinking behaviors increase during recessions. And this should serve as a warning to policymakers and clinicians.

What can be done about student loan stress? 

If you’re feeling burdened by debt and notice it’s impacting your mental health or drinking habits, talk with your doctor. While you can’t just make the debt magically vanish, there may be things you can do to lessen how much it’s stressing you out.

Lindgren recommends that clinicians ask about financial stress when they meet new clients. “We aren’t trained to ask about it,” she says. “But we know it can impact people. We need to ask so we can understand the whole picture.”

On a policy level, she says much is already known about student loan debt and how it impacts people’s everyday lives: If you have student loan debt, you’re more likely to delay marriage, kids and buying a home. Life milestones get pushed back. But we also need to consider the impacts on people’s stress levels, she says.

Things are about to get interesting, too. Lindgren says it’s almost like we’re in a massive experiment: What happens to the mental health of millions of Americans when their student debt is suddenly a problem again, after several years of not being required to make payments? (Debt payments are set to resume in September 2023.)

President Biden also has a new plan — the SAVE repayment plan. You can apply to potentially reduce or eliminate your payments altogether, which can help with the stress associated with loan payments.

“You’re not just affecting people’s financial futures, but their emotional futures as well,” Lindgren says. “We need to figure out how to set policies that make college education accessible.”