For millions of students across the globe, pursuing higher education has become synonymous with accumulating a mountain of debt.

Rising tuition and living expenses have pushed students to rely heavily on loans, resulting in an epidemic of student debt.1 As college students juggle their coursework and part-time jobs, the weight of loans can hinder their ability to excel.

While the financial burden is often discussed (and hard to ignore), the profound effects of this debt on other aspects of a borrower's life are lesser known. Academic performance and mental health are just two examples of areas that can take a hit when student debt becomes overwhelming.

In this article, we will dive into how student debt impacts overall student success, shedding light on the hidden costs of this burden. We'll also explore potential solutions and initiatives universities can implement to break the cycle and support students in achieving success beyond their graduation day.

Student Loans and Financial Stress

With interest rates climbing to an all-time high this year,2 it's no surprise that student loans are also rising. Students across the country are taking on greater liability, with the average federal student loan debt currently sitting at $37,718 per borrower.3

Taking on a great amount of debt doesn't go without consequences. The National College Health Assessment found that nearly 75% of students in America had experienced moderate to high financial distress over the past year.4

This stress can consume students' thoughts and constantly weigh them down, making it difficult for them to focus on anything other than their next paycheck.

Impact on Academic Performance

High levels of student debt can significantly impact a student's academic performance. It can be difficult for students to allocate sufficient time and energy to their coursework when they are preoccupied with financial concerns.

Research has shown for nearly two decades that higher levels of student loan debt are associated with lower academic achievement among students, as well as reduced course loads and even lower graduation rates.5

These negative effects of student debt on academic success are more pronounced for low-income college students, as a large percentage of low-income students ultimately drop out due to financial concerns.6

When juggling part-time jobs alongside their studies, many students are spread thin trying to make ends meet. This leaves them less time for studying, attending extracurricular activities, or seeking additional educational opportunities outside the classroom – all crucial components of a well-rounded education.

Keep Reading: Understand the Connection Between Financial Literacy and Student Retention Rates

Mental Health Consequences

Beyond academics, the mental health implications of student debt cannot be ignored. Multiple studies have linked financial stress to poor mental health,7 including anxiety disorders, depression, and even suicidal thoughts among college students.

One study found that first-generation students, in particular, were more likely to suffer from anxiety due to financial concerns.8 This, in turn, negatively affected their self-image, fueling self-doubt and imposter syndrome.

The constant worry about money and the pressure to succeed academically can create a toxic cycle, leading to an increased risk of mental health issues.

To make matters worse, many students lack a proper financial education to make smart borrowing decisions. An EverFi survey of incoming college students found that many did not understand basic financial concepts,9 despite taking on significant amounts of debt.

This lack of financial literacy further compounds the stress and confusion surrounding student loans, adding to students' anxiety and sense of helplessness.

Breaking the Cycle: University Initiatives

Recognizing the detrimental effects of student debt on academic performance and mental health, universities have a crucial role to play in breaking this cycle and supporting students throughout their educational journey.

Without lowering the cost of tuition, there are still plenty of steps colleges can take to help their students financially.

Financial Literacy Programs

First and foremost, universities can prioritize comprehensive financial literacy programs for students. By offering workshops, seminars, and courses on personal finance management, universities can equip students with the necessary tools to make informed decisions about borrowing and budgeting.

Consider implementing the iGrad Financial Literacy platform to assist with this process. iGrad is an innovative tool designed to provide students with comprehensive financial education, including resources on budgeting, borrowing wisely, and managing student loans.


Additionally, universities can provide more comprehensive support services for students struggling with debt-related stress or mental health issues. This might include counseling services tailored specifically to address financial anxiety or providing access to resources that assist in managing student loan repayment plans.


It is essential for colleges and universities to foster an environment where seeking help is encouraged – especially when it comes to mental health concerns related to student debt.

Creating a sense of community through support groups or peer mentoring programs would not only alleviate feelings of isolation but also promote emotional well-being among students facing similar challenges.

Alternative Funding

Universities should also expand their alternative funding options – such as scholarships or work-study programs – that reduce students' dependence on student loans. By expanding scholarship offerings based on merit or need-based criteria, institutions can provide greater opportunities for students pursuing a higher education.

Taking Proactive Steps Toward Better Financial Literacy

Student debt isn't just a financial burden. It can have far-reaching implications for academic performance and mental health. The stress and anxiety that come with debt can hinder students' abilities to excel academically, leading to lower graduation rates and limited educational opportunities. 

Recognizing these challenges, universities must step up their efforts to support students in managing their debt and maintaining their overall well-being. By taking proactive steps to support their students, institutions can help alleviate the hidden costs of student debt and empower students to succeed both on and off campus.

To learn how iGrad can help, request a demo today. 



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