The mental health impact of students struggling with debt

“It was a devastating period for me. Daily life became unbearable because of the deadly minus number in my bank account.”

Dan would rather not give his full name. He had just turned 18 when he entered university but made it through his first degree without any unusual financial difficulties. It was later, in his master’s year, that his finances fell apart and contributed to a collapse in his mental health.

Most students will not face the full trauma that Dan went through. Yet many will struggle with their finances, leading to considerable pressure and potentially affecting their studies.

Universities across the country are preparing for, or celebrating, Freshers’ Week. It’s an exciting, exhilarating event where new students are plunged into undergrad life. But amid all the advice about simple, cheap student recipes and which nights are cheapest to go out (Wednesdays), there’s often scant focus on the financial risks and how to avoid them.

A new study from the comparison site MoneySuperMarket shows that the percentage of students using payday loans while at university has risen by 136 per cent – from a tenth to more than a quarter in the last decade. Nearly a third of the 627 students questioned said they spent their maintenance loan by week five, and 36 per cent also relied on a credit card, compared to just a quarter 10 years ago

It’s all too easy for students to fall into problem debt – the pressure to spend and the limited time to carry out paid work can make it hard to balance budgets. And many students have only just left home, a time of life where it’s all too easy to make mistakes.

But financial mistakes can last a lot longer.

“The loan I received was not nearly enough to provide for comfortable living and a bursary I received from the university was quickly plunged into living costs,” says Dan. His circumstances worsened when he decided to move out of his shared accommodation.

“I was unable to find a replacement for my original room and was paying two rents, amounting to over £1,000 a month. I was forced to find a full-time job to supplement my income, all while finishing a thesis.”

His spending habits were also problematic. “I had maxed out my student overdraft, a £1,000 credit card, and had made an irresponsible purchase of a keyboard on two occasions, requiring me to sell them for a loss.”

Dan is blunt about why he found himself in such difficulties. “My debt came from bad decisions. I spent money because I thought it would help me out of a difficult living arrangement or simply to improve my day-to-day lifestyle.”

His mental health suffered and he says his life “tumbled into one awful experience”, culminating in a suicide attempt. After that, he knew he had to act if he was going to get better.

“I came back to my family home to recover,” he says. “I was able to obtain a resettlement loan from the bank to cover the full costs of my debts, paid back over seven years with low interest.

“Frankly, if I didn’t have the bank offering me that option I’d be in a much worse position. I couldn’t have worked following the suicide attempt and I’m still recovering two years later.”

Understandably, the many pressures he was under, including his financial problems, affected his studies. “It was the problem I’d go back to when all others fell on top of me – as in ‘Oh and I’ve got my thesis to complete still.’

“I passed but, had I focused more, I’m sure I could have achieved a higher grade instead of the pass mark.”

While most students do not struggle to the same extent as Dan, it’s undeniable that financial worries can have a huge impact on their studies and general wellbeing.

Vivi Friedgut, founder of Blackbullion, a learning platform that partners with universities to provide financial education to students, says undergraduates these days are being squeezed by far higher living costs.

“They are bridging these financial gaps by working and many – 21 per cent of 2,000 student respondents to 2018’s Blackbullion survey – are relying on unsecured financial products like credit cards, and payday loans, to cover shortfall.

“Unmanageable debt is stressful – it impacts how students live and learn while creating a vicious mental health cycle.

“Reducing this stress means minimising debt so be sure to maximise your incomings by making full use of scholarships and other funds while also minimising unnecessary outgoings like tech enabled transport, food deliveries and subscriptions.”

Her top advice for freshers is to look at their budget and plan it out before they begin their studies, allowing them greater control and oversight of their finances.

Dan’s story highlights that the most important lesson for every student is not about budgeting or finding the most competitive financial products, although those are essential. The most important lesson is that no financial situation is so bad it can’t be fixed.