EVERFI Content Team

Graduation should be an exciting time for college students, filled with new opportunities and professional growth. However, for many students, this milestone is overshadowed by a daunting reality: the burden of financial stress. It’s easy to overlook the connection between financial stress and mental health. Yet, research continues to highlight the profound impact that one has on the other.  

The American Psychological Association found that 72% of adults report feeling stressed about money, with 22% reporting extreme stress related to financial concerns. Credit card debt, student loan debt, and overall financial stress due to higher prices and rising interest rates are more prevalent among Gen Z today than in prior generations. 78% of students feel they do not have the information needed to repay their college loans. It’s no surprise that college students are more likely to report mental health concerns, with 33% saying personal debt is a factor.  

While many adults are stressed about finances, college students are dealing with an added layer of stress as they prepare to enter the workforce. The ripple effect of student financial stress extends beyond individual well-being, influencing the broader economy in several ways: 

  • Reduced Consumer Spending: Graduates burdened with debt are less likely to spend money on non-essential goods and services, which can stifle economic growth. Lower consumer spending affects various sectors, from retail to real estate, slowing overall economic momentum. 
  • Delayed Homeownership: High levels of debt often force graduates to delay purchasing homes. This delay can impact the housing market and related industries, including construction, home improvement, and real estate services. 
  • Entrepreneurship: Financial stress can deter graduates from pursuing entrepreneurial ventures or innovative projects due to the perceived financial risk. This hesitancy can hinder economic dynamism and job creation. 
  • Job Market Dynamics: Financially stressed graduates may accept jobs that do not match their skills or aspirations simply to meet immediate financial obligations. This mismatch can lead to lower job satisfaction and productivity, affecting overall economic efficiency and innovation. 
  • Lower Savings: Many graduates are still struggling to find jobs, and for those who are employed, 43% earn less than $50,000, making it a difficult start to their financial journey and to meet key financial goals. This means less money saved, which compounds the problem. 

Gen Z is our future workforce. If we don’t acknowledge the connection between financial stress and mental health, it will continue to have long lasting impacts and seep into the workplace. To mitigate the effects, a multi-faceted approach can help. This includes:  

  • Policy Reforms: The government can play a crucial role by enacting policies that reduce the cost of education, such as increasing funding for public universities, expanding grants and scholarships, and implementing income-driven repayment plans. 
  • Financial Education: Digital financial literacy education helps teach concepts like managing money, understanding the impacts of financial decisions, and building credit to equip students with practical skills while helping them foster a culture of financial responsibility and resilience. 
  • Mental Health Support: Universities and workplaces should offer robust mental health support services to help individuals cope with the stress of debt. Access to counseling and mental health resources can significantly alleviate the psychological burden of financial stress. 
  • Employer Initiatives: Employers can contribute by offering student loan repayment assistance programs as part of their benefits packages, which can help attract and retain talented employees while reducing financial stress. 

We must acknowledge this connection and approach it differently if we want to break cycles and build financial resilience for the next generation. This will not only benefit individuals but also contribute to the broader societal goal of promoting financial wellness and mental well-being.