Student loan debt is harmful to the mental health of most borrowers

Kate Quick, 43, said her student loan debt is causing stress and anxiety for her and her family.

Courtesy: Kate Quick

When Kate Quick, 43, completed her Master of Fine Arts degree at the University of Alaska Fairbanks 22 years ago, she had taken out about $30,000 in loans.

Now she owes almost $48,000 even after years of making payments.

“I just can’t think straight when I’m dealing with student loans,” said Quick, who now works for the University of Alaska faculty association.

She also rarely missed an opportunity for relief. Quick previously worked as a professor at the university, so she researched Public Service Loan Forgiveness, or PSLF, a program that would forgive her debt because she worked in education.

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The program requires 120 qualifying payments, which takes about 10 years. However, the rules for what types of payments are eligible are strict. Although Quick served as an adjunct and then tenure-track professor for 17 years, only payments made during her full-time tenure count toward the program.

She is missing the 120 payments she needs to qualify and no longer works with an eligible employer. Now in a different career, she sees few opportunities to return to teaching — she doesn’t want to go back to college, and she’s not certified to teach elementary, middle or high school.

Additionally, Quick had to convert her Federal Family Education Loans into direct loans when she determined PSLF eligibility. That added $17,000 to her capital.

Your monthly payments will also increase from $88 to $568 per month. If she follows her service provider’s current payment schedule, she ends up paying about $170,000 to pay off her debt. Her husband, a jewelry artist who went back to school to become a computer scientist, also has student loans and a monthly payment of more than $500.

“It’s panicking me,” she said, adding that the family has put off buying a home and saving for college for their three teenage children because of student loans.

“It’s led to some marital problems over the years because money is a thing that people fight over in relationships,” she said. “And especially when you don’t have much of it, that was us.”

A common problem

Fast is not alone. According to Momentive’s CNBC + Acorns Invest In You Student Loan Survey, more than 60% of borrowers say student loan debt has negatively impacted their mental health. The online survey was conducted January 10-13 among a national sample of 5,162 adults.

“When people can’t pay their bills or their student loans as quickly as they should, there is a level of shame and sometimes guilt,” said Aja Evans, a licensed mental health counselor who works with Laurel Road, a digital banking collaborates platform. “It can quickly lead to feeling bad about yourself and feeling like you can’t show other people who you really are because you’re worried about the financial burdens in your life.”

The survey also found that the less a person earns, the more their mental health suffers when it comes to college debt. Less than half of those earning more than $100,000 annually said educational debt negatively impacts their mental health, compared to 59% of those earning between $50,000 and $99,000 and 70% of those who earn less than $50,000 per year.

The survey found that women and younger adults are more likely to report negative mental health impacts of student loan debt. Still, more than half of baby boomers said their college debt had a negative impact on their mental health.

“People think that student debt is a problem for young people,” said Betsy Mayotte, president of the Institute of Student Loan Advisors, a nonprofit organization that helps student loan borrowers with free counseling and dispute resolution. But that’s not true, she said, pointing to millions of older borrowers who are struggling to pay off their debts and save for retirement, or who are retired and still paying off loans.

Why student loans are bad for mental health

There are many reasons why indebtedness on a student loan takes a toll on borrowers’ mental health. Many Americans with debt postpone other financial milestones, such as having a baby, buying a home, getting married, saving for retirement, or even taking vacations.

The system is also often confusing to navigate, and in addition to not understanding how their loans work, many borrowers have trouble understanding their repayment and discharge options.

This confusion can lead to higher balances or other costly mistakes.

“A lot of people have income-based repayment plans that lower their monthly payment obligations,” said Bridget Haile, operations director at Summer, who helps borrowers manage repayment. “The problem is that even if many people make monthly payments on time for years, they often see their loan balance go up rather than down.”

A growing balance, even as you make payments, is psychologically difficult to deal with, she said. If someone defaults or has not been able to make consistent payments, it can affect their credit score.

What’s next

The moratorium on federal interest and payments on student loans has helped millions of borrowers.

The Biden administration also relaxed rules on PSLF, making it easier for some borrowers to receive forgiveness, and has canceled all debts of some borrowers, such as those taken advantage of by for-profit institutions.

Still, many borrowers are unsure how to resume payments and are struggling to navigate the systems that could bring them relief. Payments and accrued interest are currently scheduled to start again in May.

Quick and her husband aren’t sure how they’ll make their monthly payments when they eventually restart.

“We’re both just tearing our hair out and wondering what to do because we can’t afford a $1,100 monthly student loan payment,” she said. “It just makes us turn our heads.”

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