Many students take on student loans without a second thought, with the hope of using their degrees to help them secure a successful career.
But for lots of young graduates, a lifetime of paying off thousands of pounds of student loan debt - along with overdrafts and credit cards - can take its toll.
In the UK, the average debt among borrowers who finished their courses in 2018 was £36,000. In the US, more than 44 million people have outstanding student loan debt, with their studies costing an average of over $34,000 a year in tuition and fees at private universities.
For the majority of graduates in employment, their repayments won’t be enough to pay off the interest, let alone the outstanding debt.
We know owing money can have a serious impact on mental health, but the way it affects students and graduates is often overlooked. In 2018, however, researchers at the UCL Institute of Education and the University of Michigan found having large student loan debts leads to lower job satisfaction, affects lifelong finances and harms mental health.
Reviewing existing research on the issue - mostly from the US but also from England - they found such debts are more likely to make people delay buying a home.
When they do take out a mortgage, they also tend to buy lower-value properties. Owing money from studies also affects career decisions and can lead to added financial stress.
“The number of students relying on student loans to pay for their higher education is constantly rising, as is the amount they borrow,” said Professor Claire Callender of the IOE and Birkbeck, one of the co-authors.
“Yet we know little about the long-term consequences of this for society and individuals. What we do know from current research is concerning. Student loan debt seems to have a harmful effect on many aspects of graduates' lives once they leave higher education.”
In 2015, a separate study at UCLA analysed 13 years of data from nearly 9,000 US adults, focusing on those with student loans. The researchers found that student loan debt was linked to lower levels of psychological wellbeing for those aged 25 to 31, even after accounting for income, family wealth and occupation.
In the US, student loan debt disproportionately affects women graduates and in particular, women of colour.
As of 2018, women hold nearly two-thirds of the outstanding student loan debt in the United States, amounting to nearly $900 billion, according to the American Association of University Women (AAUW). In part, it is because women outnumber men in college and are more likely to pursue a bachelor’s degree, but also because they are borrowing more.
Debt can also be a key factor for those who already struggle with stress, anxiety, depression and other mental health problems, meaning the problems feed into one another to create a vicious cycle. People with mental health issues are 3.5 times more likely to be in problem debt than those without mental health problems, research by the charity Money and Mental Health Policy Institute found earlier this year.
“Students are among the most financially stretched groups, so it’s no surprise university can be a time when debts build up,” says Will Berrington, media and PR officer for the charity StepChange. “Tuition fees and maintenance loans often won’t cover the essentials for many students, who can find themselves turning to consumer credit like overdrafts or private loans to survive.”
These forms of credit can seem attractive as they often won’t require repayment until the end of your studies, Berrington adds. But the problem arises when students finish university and the repayments kick in - leaving them financially vulnerable. In addition, many young people face an uphill battle to land a job as a graduate, while facing high rents and rising living costs too.
“We’d encourage those lending to students to consider these pitfalls, and to ensure their products don’t end up causing financial difficulties,” Berrington says.
“For any student struggling with debt, help with managing your finances can be found on our website: www.stepchange.org.”
The debt advice charity National Debtline also offers free and impartial advice. If you are struggling with your mental health because of money worries or debt, the charity Mind can offer support and advice.