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Source: Remind yourself of ‘what makes you happy’: Blogger shares her advice about battling debt and depression, CNBC, 2/26/21

I knew I’d ace it. I didn’t even bother to open the driver’s manual. After all, how hard could a driver’s permit test be? But when I sat down to take the test, I started sweating and began to panic. The questions were much harder than I imagined. I had no idea how many feet I was supposed to signal before a turn. I failed the test because I was blindsided by its difficulty.

Similarly, many college grads get blindsided by the effects of college debt. They think they’ll easily be able to pay down the debt after they graduate and land a good job. But they underestimate the effects of debt that go beyond the financial impact. If you have children or grandchildren who’ll head to college someday, you should know what these effects are, and how you can help your kids minimize college debt in the first place.


First, the Psychology of College Debt

When I mention college debt to my friends, many aren’t that concerned about it. They tell me it’s unavoidable and they’ll just deal with it later. What my friends don’t know, and haven’t experienced yet, are the hidden psychological effects of college debt.


It Turns Out That How We Categorize Debt Can Determine the Emotional Consequence of It 

For example, research has shown that many people view home-mortgage debt as more of an investment than a debt. Credit-card debt is viewed as an ongoing expense or a “cost-of-living” item. But college debt is often viewed as an insurmountable burden.1 As a result, we tend to feel more burdened by college debt than by other types of debt. Fifty-three percent of high-debt college borrowers have experienced depression because of their debt2 and 7% have considered suicide for the same reason.3


College Debt Can Lead to Lower Life Satisfaction

Traditional thinking goes like this: You go to college, take on college debt, graduate, get a good job, then you enjoy your career and life. But it’s not that simple.

Researchers who examined three forms of debt—home mortgages, credit cards, and student loans—found that student loan debt was the only form of debt associated with lower levels of life satisfaction. They measured life satisfaction by asking “How would you rate your life overall these days?” The more student loan debt people held, the less likely they were to rate high on life satisfaction.1 One explanation for this result was that student loan debt is somehow perceived as more psychologically burdensome than other forms of debt.


College Is Supposed to Help Us Get Ahead in Life

Contrary to this traditional thinking, research is finding that graduating with college debt can hold us back for decades. How? A survey found that 20% of graduates with college debt married later than their peers, and 35% delayed starting a family because of the financial strain of student debt.4 And 61% of Millennials say they’ll delay buying a home because of college debt.5 The psychological effects of college debt are scary, but they can also affect your kids physically.


Second, the Physical Effects of College Debt

I always thought that a person’s health was determined by diet and exercise. It turns out that college debt can also play a role.

Below are some health issues that can stem from college debt:6

  • Higher levels of stress, depression, and poorer self-reported general health
  • Raised diastolic blood pressure, which increases the risk of hypertension and stroke
  • 65% lose sleep at night due to stressing over how to repay colleges
  • 67% have physical symptoms of anxiety due to the stress from college debt, including headaches, muscle tension, upset stomach, rapid heartbeat, and fatigue
  • 43% say student loan debt has interfered with self-care, such as purchasing health insurance and gym memberships
  • Poor dietary choices, low physical activity, and substance abuse

The hidden potential psychological and physical effects of college debt are significant. But your kids might be thinking, “Yeah, but I still need a degree. And that means I’ll have to take on debt.” That may be true, but our next section will outline ways to minimize high amounts of college debt.


Third, Minimizing College Debt

If you’re planning to help your kids with college expenses, consider letting them know your plans, e.g. how much you’ll help. Also, let them know any expectations you might have of them, e.g., keeping grades up in college.

Suggest to your college-bound kids that they research, and apply for, federal and state grants. For federal aid, remind them that they can apply for aid on October 1 the year before your child goes to school.


Teach Your Kids About Merit Aid

Merit aid comes from colleges seeking to recruit the brightest high school students. Colleges compete for the best students and they’re often willing to award aid for students with high GPAs or ACT scores. If your kids are in middle school, talk to them about merit-aid opportunities and the importance of keeping their grades up. Merit scholarships are often related to academic performance, but can also be given to a candidate displaying artistic or athletic excellence, or even a combination of both. The average merit award to full-time undergraduates was $11,287 in the 2019-2020 academic year.7


Public vs. Private

Choosing a college can be one of the most exciting yet expensive decisions. Discuss the range of college choices with your kids, such as community colleges, in-state, online, two-year, and private.

Let’s compare national averages: state-college tuition is $9,687 (four years = $38,748) while the private college is $35,087 (four years = $140,348).8 Over four years, that’s a difference of $101,600. And that doesn’t even include the cost of room and board. Not sure which colleges to choose? Check out the Fiske Guide to Colleges 2022 or US News & World Report’s rankings of public and private colleges. Both provide information on schools based on academics, location, and value.


“For My Major, I’ll Need a Certain (More Expensive) College Because of My Field of Study” 

Before entering college, some students think they need to attend an expensive private college because of their major. Sometimes that makes sense, especially if a school is known for its expertise in a certain area of study or program. But students may pay a hefty price for their education, then end up in a career that’s not even related to their major. A study from the Federal Reserve Bank of New York found that only 27% of college graduates work in a field related to their major.9


Public Colleges Usually Cost Less

Cost of tuition for four years 

Source: See the Average College Tuition in 2020-2021, US News & World Report, 9/14/20


Three Things to Remember About the Long-Term Effects of College Debt

First, it’s important to remember that there are hidden psychological effects of college debt. A high amount of college debt can result in diminished life satisfaction. Second, college debt can have physical effects, including headaches, muscle tension, rapid heartbeat, and fatigue. Third, there are several ways students can minimize college debt, such as by seeking financial aid and carefully considering their college choice.


Eventually, I Passed My Permit Test

After my first attempt, I realized I underestimated the difficulty of the permit test. So next time, I prepared better by reading the driver’s manual and doing the practice tests. I passed. Similarly, it’s easy for students to underestimate the long-term difficulties of college debt. Help your child, or grandchild, recognize the effects and suggest ways for them to minimize high levels of college debt.

Next Steps

1 Have a discussion with your kids, or grandchildren, about whether or not you’re planning to help them with college expenses
2 Remind them about financial-aid application deadlines
3 If they’re unsure about their college choice, let them know about the Fiske Guide to Colleges or the US News & World Report college rankings

More on Living Well in Retirement >

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This article is based off of our popular Beyond Investment Illusions module. Click here to access additional content to share.

1  The Devastating Psychological Burden of Student Loans, Psychology Today, 12/6/20

2  Remind yourself of ‘what makes you happy’: Blogger shares her advice about battling debt and depression, CNBC, 2/26/21

3  7 Scary Numbers That Show How Bad Student Loan Debt Is For Mental Health, HuffPost, 5/14/19

4 14 Reasons Not to Take Out Student Loans for College, Pearson, 11/15/19

5  61% of millennials said they’ve delayed buying a house because of student-loan debt, a new study found, Business Insider, 9/26/19

6  The Mental and Physical Toll of Student Loans, The Atlantic, 2/2/15. Most recent data available.

7  17 Things to Know About Merit Aid Scholarships, US News & World Report, 2/1/21

8  See the Average College Tuition in 2020-2021, US News & World Report, 9/14/20

9  Philosophy Degrees and Sales Jobs, Inside Higher Ed, 8/2/19


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