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The Mental Health Costs of Student Loans



While the prospect of attaining a college degree is daunting for many new students, Black students often face a number of systemic barriers that collide and create increased hardship. For instance, Black students often struggle to feel represented and supported on college campuses. As of 2020, fewer than 10% of higher education professionals identified as Black; white employees account for over 75% of these positions. This is even more striking among administrators and executive leaders, as fewer than 8% are Black, while over 80% are white. On the student level, in 2018, Black students only made up 13% of the total undergraduate population; only an average of 45.9% of Black students complete their undergraduate degrees within six years, compared to 67.2% of their white counterparts. Furthermore, a 2016 poll by the National Survey of Student Engagement revealed that about 25% of Black students felt that they did not belong in their campus communities, while 14% of Black students reported feeling physically unsafe on their college campuses. When one considers that poverty, illness, and systemic racism put Black youths at a higher risk of depression and anxiety, it is clear that college campuses—which should serve as safe environments to foster learning and growth—are failing Black students.


Once students leave school, they are faced with having to pay back their student loans, and the playing field is far from level. Due to financial inequities, the wage gap has widened over the course of the last twenty years, with the median wage of Black workers being 75.6% of their white peers; likewise, the average Black household has only 12.7% of the wealth of an average white household. Beyond the wage gap, Black workers often face discrimination in the labor market, are blocked from opportunities and career advancement, and often have to take less secure and lower paying jobs. Because of this, Black families are less able to build generational wealth and attain financial security. As a result, Black borrowers can only pay back an average of 4% of their total student loan debt each year, compared to white borrowers that pay back an average of 10%. More demoralizing, however, is the data that indicates that nearly half of Black students who take out student loans are unable to repay and have to default on their loans within 12 years of enrollment.





While the societal expectation is often rooted in the notion that a college degree guarantees a clear career path and personal satisfaction, this is often not the case. Because Black students owe exponentially more than their white counterparts and are more likely to have to default on their loans, they often have to put off renting or owning a home and marrying their partners due to surrounding expenses. However, the burden of student loan debt costs students much more than money. A 2014 Gallup analysis compared Americans who graduated between 1990 and 2014 and borrowed $50,000 and their peers who did not have student loans; ultimately, the study found that these borrowers were less likely to be “thriving in four of five elements of well-being.” These elements include purpose, or the personal satisfaction surrounding goal completion; financial, or the ability to manage one’s economic life and be financially secure; community, or liking one’s place of residence and feeling safe; and physical, or being in good health.


Furthermore, a 2015 study indicated that the possession of student loan debt is associated with poorer psychological functioning; additionally, parental wealth modified this relationship, indicating that access to generational wealth may reduce the impact of student loan debt on one’s mental health. More recently, a 2020 survey by Student Debt Crisis, a national student debt advocacy organization, indicates that 59% of respondents faced increased stress, anxiety or depression due to their student loans in light of the COVID-19 pandemic, with over 20% of respondents reporting having been furloughed, laid off, or faced with reduced working hours during the pandemic. Furthermore, a 2013 study demonstrated statistically significant links between debt, poor mental health, and suicide, while a 2020 report indicates that people experiencing major financial stressors, including debt, may be up to 20 times more likely to attempt suicide than those not facing financial hardship.


While these mental health risks impact all borrowers, Black borrowers are arguably the most at risk. Being faced with a lack of representation on campuses where they often feel unsafe, and then turned out into a society that bars them from equitable opportunities, Black students are often faced with financial barriers that seem impossible to overcome. While many universities offer mental health services to their students, there are a number of resources aimed at helping Black people specifically.



Furthermore, the Prosp(a)rity Project connects Black women with financial counseling and empowerment services. On May 19, we will be offering a day of virtual enrichment, community building and candid conversation through our first-annual 35*2 Free Financial Empowerment Conference. Tickets are free, so be sure to register to hear keynote addresses from top finance professionals, curated panel discussions co-hosted by industry-leading speakers, and more.


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