How to Reduce Student Loan Stress

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Dori Zinn

By Dori Zinn

April 5, 2019

College graduates who have student loans are more likely to suffer from stress and depression than college students who graduate without student loan debt. Understanding the causes of student loan stress can help borrowers address these challenges and take steps to reduce their student loan stress.

Paying back your student loans can feel overwhelming and scary. If no one prepared you for repayment, you may not be aware of when your due date starts — or if it’s already started. You might even feel compelled to ignore your student loans completely. What you don’t know can’t hurt, right?

But, ignoring your student loans can stress you out even more. Take the necessary steps to understanding your student loan debt and how to get a handle on your repayment journey.

Student Loans Cause Stress

According to a 2018 survey by the American Psychological Association (APA), Stress in America, money is the leading cause of stress in the U.S., with 64% of adults identifying it as a primary stressor. Among Gen Z respondents, 81% reported money as a significant source of stress. Personal debt, including student loans and credit card debt, is a significant source of stress for 42% of adults and 33% of Gen Z respondents.

A 2015 report by the University of South Carolina, Sick of our loans: Student borrowing and the mental health of young adults in the United States, analyzed data from the National Longitudinal Study of Youth (NLSY97), linking higher amounts of student loan debt to a greater degree of stress. Students who graduate with more debt are also more likely to suffer from depression.

Student loan stress can cause sleeplessness, headaches, tension, upset stomach, fatigue, loss of motivation, isolation and depression.


Causes of Student Loan Stress

The complexity of student loans contributes to a lack of control, causing anxiety and stress. Student loan stress is not just a problem for borrowers who leave college with more debt than they can afford to repay.

People fear what they don’t understand. Borrowers often lack a complete understanding of their student loans because student loans are complicated. There are many details they need to worry about, including fixed vs. variable interest rates, fees, federal vs. private student loans, type of repayment plan, length of the repayment term, delinquency, default and a lack of transparency.

This makes it more difficult for borrowers to deal with their debt, as there are too many decisions. Common sense intuitions do not apply. For example, cutting the interest rate in half does not cut the monthly payment in half. Borrowers feel overwhelmed, which contributes to stress levels. They feel anxious and don’t want to face their debt. This contributes to the feeling that their student loans are spiraling out of control.

Borrowers are also concerned about making mistakes with their student loans. They know they’ve already made some mistakes, by borrowing too much money to pay for their education.

They worry that they’ll be stuck with too high an interest rate or too high a monthly loan payment. They worry about interest rates rising. They worry that refinancing their student loans may be a mistake. They worry that they’ve waited too long to refinance their student loans. They worry that it is too soon to refinance their student loans. They worry that refinancing federal loans into private student loans might be a mistake. Debt causes doubt.

They also worry about what they don’t know. They worry that they don’t know what other mistakes they might be making. This fear of the unknown can cause a feeling of paralysis, where they are frozen in inaction.

Personal finance is also deeply personal. Some borrowers are embarrassed by their student loan debt. It is their secret shame. They are not just worried about the possibility that an application to refinance their student loans will be rejected, but also that they will be ridiculed for the attempt. They worry that the lender will laugh at their loan application because they have too much debt, too little income, too low a credit score and too high a debt-to-income ratio. They fear having their bad financial habits judged by someone else.

Refinancing federal student loans means a loss in many benefits – income-driven repayment plans, any federal forgiveness programs, generous deferment options, and more.

A contributing factor is a lack of trusted resources. Borrowers don’t trust lenders because they know that most lenders place their own profits ahead of the borrower’s best interests. Lenders who claim to be a friend of the borrower do so as a marketing tactic. Most third party web sites that provide advice about student loans depend on promoting private student loans and refinancing as a source of advertising revenue. So, can you really trust them when they aggressively push private student loan products at you?

How to Reduce Student Loan Stress

There are several specific steps you can take to help alleviate your student loan stress. Taking these steps exercises control over your student loans, taming the tiger.

Learn about Financial Literacy

Financial literacy training will help you understand your finances better and will provide you with tools you can use to take action concerning your student loans. Understanding how student loans work will help you make smarter, more informed decisions. Increasing your awareness of debt and how to handle it will increase your control over your finances.

Learning about financial literacy can involve taking a financial literacy course in college or reading a book of financial literacy basics, like Suze Orman’s The Money Book for the Young, Fabulous & Broke or Beth Kobliner’s Get a Financial Life: Personal Finance in Your Twenties and Thirties. Consumer Reports magazine also has very good coverage of personal finance topics.

Try talking with your parents. Even if your parents aren’t financial literacy experts, they’ve had more time to make mistakes, so you can learn from their experience. Sometimes, knowing what not to do is just as important as knowing what to do.

Know Your Loans

The more you know about your student loans, the more power you will have over them.

Start by making a summary spreadsheet with actionable information about each of your student loans, such as:

  • Lender name, telephone number, web site and payment address
  • Interest rate
  • Type of interest rate (fixed or variable; if variable, how frequently does the rate reset?)
  • Payment due date
  • Monthly payment
  • Repayment plan and length of the repayment term
  • Total amount owed
  • How much of last month’s payment was interest

This information will help you manage your student loans better. Understanding your loans will help reduce the stress you have from simply not knowing about them.

Read Your Mail

It’s time to start opening up those letters and emails from lenders that detail your loan information.

Ignoring your loans won’t make them go away. Turning a blind eye and letting late payments add up can crush your credit score. Payment history makes up 35 percent of your credit score. One late payment can cause a huge drop in your credit score. Many late payments means your chances of borrowing money in the future — like buying a car or getting a credit card — is more likely to get denied. It can also increase the interest rates on future debt.

Track Your Spending

Every time you spend money, get a receipt or write yourself a note listing the date, the amount and the purpose of the spending.

Transcribe this information into a spreadsheet or money management program like Quicken or each night.

Assign each expense to a broad category like Eating Out, Entertainment, Housing, Clothing, Insurance, Transportation, Medical Care, Taxes and Student Loans.

Also, tag each expense as a need or a want. Be realistic about what is mandatory and what is discretionary. Cable TV and cell phone service are luxuries, not necessities.

At the end of the month, calculate totals for each category and tag.

Just being aware of how much you are spending and how you are spending your money will help you exercise restraint in the future. The financial information will also reduce your stress by putting you in control.

Automate Your Student Loan Payments

Most lenders let you automate your student loan payments through auto-debit, where your monthly loan payment is automatically transferred to the lender.

Yes, this will reduce the likelihood of being late with a payment, and many lenders offer a small interest rate reduction as an incentive. You will get used to having less money in your bank account, especially if you time the loan payments to occur soon after you get your paycheck.

But, this will also reduce your student loan stress because it will eliminate the need to think about your student loans when you make the loan payments. Your bank and the lender take care of it for you.

Plus, you remain in control of the automated payments. You can tell your bank to stop making the payments at any time. Not that you should. But, you have the power.

Money Mondays

Once a week, on Mondays, take an action to improve your finances. Even a small step can help reduce your student loan stress by exercising control over your life.

There are many ways to free up cash to pay down debt, such as cutting spending and earning extra money. You can also sell stuff you no longer need.

After you build an emergency fund, you can apply the savings to paying down your student loans.

Pick one idea each week and implement it. It can be as simple as brown-bagging lunches or learning how to make your own coffee or cancelling a subscription you don’t use. Writing down these goals may increase the odds you’ll stick to these financial resolutions.

Freeze Your Spending

Spending has a tendency to increase to consume all available cash. This is why even some doctors earning six-figure salaries live paycheck to paycheck.

A spending freeze is one way to take control over your spending. Just say no. There are many ways of doing this, such as a no spending holiday or switching spending from plastic to paper, but one of the more interesting approaches involves literally freezing your money.

The idea is to throw your credit cards in a Ziploc bag, submerge it in a small container of water, and put it in the freezer. Your credit cards end up in a block of ice, which stops you from using them. If you must use a credit card, you will have to thaw it out, which is time consuming. This prevents impulse buys.

Let It Snow

Making extra payments on your student loans or even just making the payments on time will have a cascading effect, causing your financial situation to improve with every extra payment.

Financial folks often refer to the snowball method or avalanche method. The gist is that as you make extra payments on your student loans, more of each subsequent payment will be applied to the loan balance, causing your loan balance to decrease faster and faster.

As you pay off one loan, adding the money you previously paid per month for that loan to the payment for the next loan will cause the next loan to be paid off even quicker.

Thus, if you have extra money, make extra payments on the loan with the highest interest rate. This will save you money by paying it off quicker.

Nothing helps reduce student loan stress more than watching your loan balance decrease.

At, our goal is to help you make smart decisions about saving and paying for education. Some of the products featured in this article are from our partners, but this doesn’t influence our evaluations. Our opinions are our own.

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