Your Brain on Student Loans

Casey Hynes

More than two-thirds of college students leave school in debt. Loans taken out to finance higher education—long considered a necessity for most well-paying jobs—are eating up an average 18 percent of income for millennial graduates, with most expecting to still be paying in their 40s. This is a relatively new phenomenon—in the last 20 years, the cost of attending an in-state public university has increased 237 percent, while private universities have increased tuition by 157 percent. The ol’ student loan ball and chain can delay important life milestones like marriage, parenthood, and home ownership.

It’s not just student’s credit scores that are on the line—taking on decades of debt also has troubling implications for mental health. After borrowing more than $100,000 in loans to attend the undergraduate and graduate programs of my dreams, I’m all too familiar with the physical and mental symptoms of debt-driven despair. Borrowers have reported experiencing anxiety, insomnia, headaches, rapid heartbeat, and a tendency toward isolation related to student loan stresses. In a survey by Student Loan Hero, nearly 65 percent of respondents said they had lost sleep worrying about their debts. More than 70 percent reported suffering from stress-related headaches, and half said student loan anxiety was giving them an upset stomach.

From FOMO to financial woes

As a nation, we’ve done little to assist our high school seniors in understanding the financial implications of attending a pricey university versus a community college or trade school. A study by student loan servicer Navient found 62 percent of high school respondents either weren’t sure how they’d finance their college careers or didn’t think they’d need student loans, while 61 percent of college freshman believed they would need a loan at some point.

Part of the problem is that financial literacy isn’t a priority in our public school system. According to the Council for Economic Education, only 17 states required a personal finance course in high school. Just 20 required economics. That leaves most teens to rely on their families or their own research to learn the intricacies of compound interest and budgeting for monthly loan payments.

And while learning is one thing, doing is another. Teenagers aren’t known for their natural ability to make pragmatic long-term decisions, a shortcoming that modern science backs up. While we once believed teenage brains were just younger versions of adult brains, scientists now realize that teenage brains aren’t fully developed, particularly in the areas that control impulse and emotion. As Alexandra Sifferlin writes in Time, “Doctors now believe that this mismatch in development of the impulse-control part of the brain and the hormone- and emotion-fueled part of the brain is what causes the risk-taking behaviors that are so common among teenagers.”

So, likely unaware of the risk of taking on more debt than you can comfortably afford? Check. Developmentally primed to take the risk anyway? Check. And you’d think deflating their teen’s outsized expectations would be a job for worldly, level-headed parents, but, you’d be wrong.

Elizabeth Kromhout, a marriage and family therapist who works with teenagers preparing for college, often sees parents determined that their children attend what they perceive as the “best” schools, even if it means going into debt to do so—a goal that typically trickles down to their children. Kromhout, who works in Los Angeles’ wealthy Westside, says the students she sees are inundated with concerns about their futures and see attending a top-tier school as a way to ease that anxiety. Of course, those elite schools also have hefty marketing budgets devoted to highlighting their unparalleled “college experience” and residential perks that put country clubs to shame. “It’s very easy to get swept up in the excitement and end up going to a super-expensive school without calculating what your life will look like five to six years from now, because it sounds and feels good in the moment,” Kromhout says.

It’s something I understand well. I was one of those kids who refused to go to community college because I had serious fear of missing out. I had worked hard all through high school and was determined to go to an out-of-state private school—Mount St. Mary’s University—which I fell in love with the second the campus tour started. I got almost a full ride scholarship from a much smaller school in Vermont, and I turned it down. (There’s an overly emotional teenage brain with an underdeveloped prefrontal cortex for you.) In my case, my parents did try to warn me. They tried to talk to me about how much money I was borrowing and what that would mean after graduation, but I was not hearing it.

It’ll all work out, right?

Candice Marie Latham, founder of the personal finance site Young Yet Wise, says borrowing money for school was a given. She came from a low-income family and understood early on that her parents didn’t have the ability to set money aside in a college fund.

But Latham says she wishes she had known more about personal finance and money management before she financed her education at Rochester Institute of Technology. “I really didn’t have a concept of money,” she says. “I just thought I’d write a check at the end of four years.”

The assumption that she’d immediately land a job that would allow her to repay her loans quickly is one many student borrowers mistakenly make. A common refrain among the experts and student debt survivors interviewed for this article was that most students don’t have an accurate view of what life will be like post-graduation, vastly overestimating their opportunities and salaries for their early career years.

“Young borrowers understand the obligation well enough to provide legally binding consent,” says Donald E. Petersen, an Orlando-based consumer attorney who focuses on helping clients resolve debt collection issues. “But many do not have sufficient information about their probable earnings. Even the most transparent of schools cannot guarantee a student that they will remain in their major or that the job market in that field, or the economy in general, won’t change substantially by the time they graduate, [never mind] during the 10 or 20 years required to repay their loans.”

Latham searched for six months before landing her first job, which paid $30,000 a year without benefits. She began paying $300 a month on her loans but requested a deferment when she was laid off. She endured a second job loss before gaining the financial ability to aggressively pay off her loans four years after graduating. Between her graduation in 2011 and her last installment in 2017, she paid $47,435 on a principle balance of $38,000.

Personally, I’m not sure I even looked at the numbers—and I certainly didn’t think about my loan balance while I was in school. My focus was entirely on getting my dream education. Before I had even graduated from my undergrad program at Mount St. Mary’s University, I was on the phone with Sallie Mae taking out a loan that I am pretty sure was upward of $50,000, maybe even $60,000, for graduate school. I was going to journalism school at Columbia University, that was my dream, and I refused to consider declining my acceptance. Apparently, my intellectual ability stopped short of understanding compound interest.

“The problem with huge student loans is that they get bigger over time, and the more one borrows, the quicker that happens,” says Timothy Lavelle, founder of the site Forget Student Loan Debt. “Everyone talks about starting to invest early to take advantage of compound interest, but with student loans, the opposite is true. Racking up a huge debt early lets compound interest work against you,” he says. “People are constantly asking me how they could owe more than they originally borrowed, especially if they’ve already paid tens of thousands of dollars toward their loan balance. They don’t realize the debt is growing faster than they can pay it off.”

Rising waves of panic

Paul Compeau, founder of the boutique financial aid consultancy BridgeWise College Planning says the college debt burden can be a difficult one to escape. “Unfortunately, once the debt cycle is started in your early 20s, it often results in you having to resort to financing cars, emergencies, vacations, and many other things over the following decades,” he says.

Taking on additional debt may perpetuate feelings of anxiety and hopelessness. Seventy-four percent of respondents to the Student Loan Hero survey said they isolated themselves from loved ones because of their debts, an action that can exacerbate periods of depression and anxiety.

Melanie Lockert, author of Dear Debt: A Story of Breaking Up With Debt and founder of the Lola Retreat, a personal finance event for women, borrowed $81,000 to finance her undergraduate studies at California State University—Long Beach and her master’s degree at New York University.

Within a year of finishing her master’s program, Lockert relocated from New York to Portland, Oregon, to lower her cost of living and better manage her loans. But even though her rent in Portland was half what it was in New York and her overall expenses were lower, Lockert still struggled. During her first year in Portland, she worked two entry-level nonprofit jobs, never earning more than $12 an hour, and used food stamps to get by. The financial strain took its toll, and Lockert says it negatively impacted every area of her life.

“For the whole year after graduation, I cried every day and felt consumed by my debt,” she says. “I felt depressed. I would panic and feel immensely anxious.” She also says, “I felt ashamed that I went to a fancy private school and couldn’t pay back my debt the way I wanted.”

While she eventually earned more money, the stress and shame followed her for more than a decade. In order to rid herself of debt, “I had to keep living like a college student into my early 30s,” Lockert says.

When Sallie Mae came calling and I started taking my debt more seriously, I felt this crushing weight on my chest that would sometimes culminate in midnight panic attacks. I still feel that weight. Some days I feel really on top of things and am optimistic that I’ll be able to aggressively pay my loans down in the next few years. Other days, I’m just stupefied by how much I owe. I literally feel my chest tightening as I write this.

Breaking the debt-stress cycle

The simplest solution—just don’t attend college!—seems fairly unrealistic. Aside from a few outliers who became multimillionaires or billionaires without post-secondary education, the current economy favors those who attend college. People who hold at least a bachelor’s degree are twice as likely to be employed than those who hold only a high school diploma, and they get paid, on average, $573 more per week. That gap widens significantly compared with professionals who hold advanced degrees. Hefty college debt is now regarded as a necessary evil by many families.

However, there are ways to approach student loans with eyes wide-open. While most high school students wouldn’t think to research compound interest and earnings forecasts, parents can step up their efforts to educate them about the long-term impact of their debts. It’s a difficult emotional moment, but parents and guidance counselors should help clarify what type of financial support students can expect well before they discuss campus visits, including what a future with student loans looks like.

Students and recent grads still in the college prep phase might consider attending a less expensive school or enrolling in a local community college to complete their basic courses. Kromhout, the teen therapist, believes strongly in junior and community colleges, especially for students who are unsure what they want to major in.

To help families sort it all out, Compeau recommends working backward from the student’s desired profession. “Planning for college should be in reverse of how most families do it: they should research a career first, and then decide what major and college makes sense,” he says. “If a career is the result of the college debt, and there is a high likelihood income can support the debt repayment, then there isn’t an issue.”

For graduates dealing with the burden of hefty student loans and compound interest, some may feel like extreme measures are the best viable option. As soon as she could afford it, Latham paid $1,000 toward her student loans every month and adjusted her lifestyle accordingly. But not all experts recommend relying on aggressive repayment. Petersen cautions, “Budgeting a spartan lifestyle can grow old, especially during the sustained time periods required before the borrower’s earnings increase enough to fund some discretionary spending in their budget.” I’ve toned down spending in order to get out of debt, but the type of aggressive measures some people take are unrealistic for me due to family commitments. Personally, I don’t want to look back and realize that my debt burden took priority over visiting my close-knit family several states away.

Others may hold out hope for the eventual forgiveness programs many politicians like Hillary Clinton, Sen. Bernie Sanders, and Ohio Gov. John Kasich have promised over the years, but Latham advises taking a realistic view of the path out of debt. She says she often hears from people who expect that a new government program or something akin to a financial miracle will wipe away their loan balances. “I just want people to know there’s no one coming to save them,” Latham says.

For Latham, what saved her from sinking under a crushing debt load wasn’t magical thinking, it was focusing on paying off individual loans instead of obsessing over the total number. Clearing an $8,000 account seemed a lot more achievable than $47,435, so she put most of her cash toward paying off the smaller balances first while paying the minimum on the overall total. “I think that made it a little more bearable,” she says.

For those currently facing down loan anxiety, talking to a mental health counselor can help, says Elyssa Kirkham, a finance and debt writer for Student Loan Hero. Nonprofit counselors often speak with those in debt at a reduced or even no-cost rate. Deep breathing and meditation might not help graduates pay down ballooning loan balances any faster, but at least they can help ease those middle-of-the-night panic attacks.