Written By Travis Hornsby, CFA®, CFP®
Mental health is something many student loan borrowers struggle with. It was the focus of a recent survey and I appreciate every single one of you who took the time to respond to the questions.
Even though the results were stunning, Student Loan Planner® can help. I can’t wave a magic wand and make it all go away. But if you’ve felt stress or worry about your student loan debt, you’re not alone. The feelings are common.
I’m going to share the results of the survey along with some tools to deal with the massive failure of higher education to address the mental health toll that their cost is placing on you.
Anxiety is the most common feeling about student loans
What stood out above all else was anxiety about student loans. It makes sense because anxiety is a natural response to stress in your life, and there’s no doubt your student loans will cause you stress.
Our survey revealed that 80% to 90% of our readers had severe student loan anxiety at some point in their life. Most borrowers who answered our survey are most afraid of having to pay back the large balance that you owe.
What do people worry about?
It comes down to two main categories:
- Math issues: Growing interest, the fear of forgiveness being eliminated and the tax bomb.
- Impact on your life: The ability to buy a house, having kids and romantic relationships.
Severe effects of student loans on mental health
The rest of the survey covers the more severe effects of student loans on mental health. We compared the impact of student loans compared to how borrowers are feeling about the coronavirus pandemic.
The topics could be upsetting to some people, and there will be some mention of depression and suicide.
If you or someone you love has ever talked about suicide or thought about suicide, please have this number handy: 1-800-273-TALK (8255) – that’s the National Suicide Prevention Hotline. Also, look into therapists or counselors, and contact your insurance company because they might recommend preferred providers in your area.
Among young professionals, our survey found that student loans cause 2.5x as many suicidal thoughts as COVID-19.
Depression was another primary concern among student loan borrowers. Depending on the profession, anywhere from 30% to 50% of respondents expressed they had felt depressed because of their student loans.
It’s unconscionable that the schools don’t see that statistic and try to do a better job of helping people prepare for that kind of emotion. That’s what bothers me the most.
The cost of school, housing, and so many other things have soared in price, and that’s making borrowers feel like they can’t live their best lives.
Hope for your future with student loans
Even though life with student loans sounds bleak, you have options. A change in your outlook can have a significant impact on helping you achieve your financial goals and major life milestones despite your student loan debt.
Going back to the two major issues that cause anxiety about student loans, let’s discuss how student loan math works and the impact of student debt on your life.
Decoding math issues
First, remember that student loan interest is simple and not compound. With simple interest, if you pay zero for 20 years, your balance will almost double.
But compare that to compounding interest, and your balance would grow to 4x the original balance.
It’s important to know that student loan interest isn’t that bad. The interest looks worse the first few years you’re repaying your student loans. However, it will balance out over time.
Borrowers also worry about student loan forgiveness going away, and I never understood why. Forgiveness is in the promissory note you signed when you took out your student loans. Changing it for people that already have loans would be extremely difficult.
Forgiveness isn’t going anywhere.
Finally, there’s the tax bomb. If the tax bomb ruins your finances, I’m going to be stunned. The tax bomb isn’t going to be a problem because they’re not going to be able to collect it.
The IRS code has something called the insolvency rule. Basically, if your assets are less than your debt, you don’t owe the taxes on the debt. A good CPA can get the debt discharged.
Pursuing your life goals
While math issues aren’t anything to worry about, life issues that come up because of student loan debt are real stressors. One of the biggest worries borrowers have is being able to buy a house with student loans.
Here’s the good news: Ever since Freddie Mac and Fannie Mae released new guidelines in 2017, lenders use your IBR payment to calculate your mortgage eligibility. You shouldn’t have a problem qualifying for a mortgage if you buy a house that’s less than 3x your income.
The second concern among borrowers is thinking they can’t have kids or can’t have as many kids as they’d like. I won’t minimize that pain because that is a real concern people have.
But I will say this. If you compare your ability to start a family to someone who is in the general working-class, you can more easily afford to have kids. If you think you can’t, go through your budget again and consider the required expenses for having kids versus the ones you want to have.
Additionally, our survey found that a significant number of people have had relationships end because of the stress of their student loans. It makes sense because finances can strain a relationship.
In this case, communication is key. Talk to your partner about money, sex, plans, careers, and life goals to get on the same page.
You might find people that don’t want to date you because of your student loan debt, but that’s true of anything. You’ll come across people that don’t want to date you because of your height, occupation, previous relationship status, or maybe if you already had kids from a previous relationship.
Debt is one of many things. A person who truly loves you is not going to let debt stand in the way.
Don’t let student loan debt stop you from living your best life
Student loan debt can be stressful. But it doesn’t have to stop you from living your best life. If you have a steady job, you shouldn't be held back. You can do anything from buying rentals, investing, starting a side hustle, or picking up extra shifts.
You can make more money and change your finances by thinking about what’s possible instead of focusing on the negative.
Even if you get laid off, your future is wide open. Maybe it’s time to go back to school and start a new career.
The bottom line is that fear comes from a lack of knowledge. When you know how to deal with your loans and the emotions of your loans, your life can be really good. If you need help making a plan for your student loans, we’re here to help. Book a consult and transform your apprehension about the future into a plan for the future.
Not sure what to do with your student loans?
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