Student Debt Forgiveness Plan and Mental Health

President Biden’s plan to forgive some school loans is giving hope to many struggling to repay. In this Verywell Mind article, Mindpath Health’s Zishan Khan, MD, discusses how the plan could provide greater career opportunities for strapped workers.

On August 24, President Biden announced a historic student debt forgiveness plan.

According to the White House, the Department of Education will cancel up to $20,000 in debt to Pell Grant recipients with loans held by the Department of Education, and up to $10,000 in debt to non-Pell Grant recipients for borrowers whose individual income is less than $125,000.

This is a major relief as the pandemic prompted the suspension of mandatory payments and interest on federal student loans, but repayments were expected to resume in 2023.

While the forgiveness plan is beneficial to millions, it’s a mere Band-Aid on the much bigger problem of rising education costs and barriers to affordability. But even after acknowledging its shortcomings, the plan still has the power to remove a great deal of stress that indebted Americans are facing and will hopefully improve mental health.

Student debt forgiveness as permission to exhale

Neuroscientist and clinical social worker Renetta Weaver, LCSW-C, says, “Owing a debt can feel like the pain of not being able to breathe because you aren’t getting enough oxygen to live. For many, student loan forgiveness feels like permission to exhale, to live and actually begin to enjoy the life that graduating from college promised them.”

Weaver explains, “The invisible burden of financial stress can have many visible signs. For instance, our stress might show up in our weight or signs of early aging such as gray hair or wrinkles.”

In this way, Weaver notes how financial strain can have the appearance of being down and depressed, as individuals can look like what they are going though. “It can also show up in our mood, where we are more angry, irritated, agitated or sad, and impact our relationships,” she says.

While some may be unfamiliar with such precarious financial circumstances, Weaver understands how not being able to afford to go out because of the cost of doing so can impact mental health adversely.

Weaver says, “Some people didn’t take out loans or paid theirs back [already] but I wish the public would know that, for many, they didn’t have that option. Loan forgiveness is not a handout, it is a hand up.”

For many, Weaver notes that Biden’s student debt forgiveness will not even cancel all they owe, but it may make them feel like they are making progress. “It’s just the light at the end of a dark tunnel,” she says.

Weaver explains, “Financial stress has contributed to emotional and physical health issues. A lot of people are ashamed of their financial circumstances because they are not where society said they should be.”

Given how demoralizing that can be, Weaver highlights, “I just want to remind you that you probably didn’t learn about investing, so give yourself some grace and compassion when it comes to your finances.”

Many people are embarrassed to talk about finances, as Weaver notes that others may be reluctant to budget, as it can feel easier to ignore the issue. “But in order to heal it, we must reveal it. There are financial counselors eager to help you change your money mindset and story,” she says.

Relief for crushing student debt

Psychiatrist with Mindpath Health, Zishan Khan, MD, says, “Student debt forgiveness will absolutely have a positive impact on the mental health of millions of people who have been dealing with crushing debt.”

Khan explains, “Lessening the debt burden will ultimately lead to happier people that suffer less from depression and anxiety. However, this is not simply because people will end up with more money in their bank account and therefore will be more content in life. It is more than just that.”

For many people, Khan notes that they may have had to choose a career based primarily on the salary and how much they will make in order to be able to pay their bills. “With student loan forgiveness, many can choose to pursue careers they truly are interested in,” he says.

Given how people can feel shame when it comes to debt, Khan highlights, “President Biden’s student debt forgiveness plan can help these people feel less disappointed with how their life has turned out.”

Khan explains, “Most people that pursue a higher level of education don’t envision their future consisting of constant worry about how they will pay rent, afford groceries, keep the electricity on, and still have enough saved to make their monthly payment towards their student loans.”

People may fail to have comfortable lives when drowning in debt, as Khan notes that they are always forced to make sacrifices. “Financial stress can lead to worsening anxiety and difficulty getting proper sleep, as well as depression from low self-esteem and a lack of confidence,” he says.

Khan highlights, “The financial burden one faces can lead to an increased risk of domestic violence and abuse in the household. The embarrassment a person feels when they’ve worked so hard to achieve their goals only to discover they are having to fight to stay afloat can be devastating.”

When someone is struggling to simply pay bills, Khan notes that they end up putting on hold plans to get married, buy a home, start a family, or reward oneself with a much-deserved vacation. “This also makes it difficult to set aside money for retirement,” he says.

Khan explains, “It is interesting how many people believe that student debt is simply a young person’s issue. This is simply not true. Many people with severe debt are professionals that are not in their situations due to excessive spending or choosing to live beyond their means.”

Predatory student loan debt persists

Bianca Martinez, who is based in NYC, NY, says, “Although I paid $17,000 out of my $20,000 already, that last bit is killing my pockets so it’ll give me room to save and think of ways to use that money for self care.”

For Martinez, who completed a Bachelors of Arts degree in Social and Cultural Analysis from the College of Arts and Science at New York University about a decade ago, they have consistently contributed to paying off this debt whenever they were able, i.e. for at least 5 years.

They made use of a Higher Education Opportunity Program, but Martinez notes that it was not a scholarship, however it subsidized their studies considerably, as a needs-based academic program in New York.

Martinez explains, “You would come in earlier than most students and get started on some of the classwork that you would be doing during your freshman year, so that way you have an advantage to succeed in your program, because statistically BIPOC students can fall behind in their first year and sometimes not even make it to their second semester.”

Their experience highlights the issue of predatory student loan debt in America, especially when the racial wealth gap is the widest it has ever been. Since they could not rely on generational wealth that often comes from stolen Indigenous land and Black labor, they had few options to pursue an education beyond high school towards achieving a better life.

Navigating a substantial financial burden

Psychotherapist, Matt Glowiak, PhD, LCPC, says, “Although most who find themselves financially burdened by student loans entered the process well-informed of what they were getting into, compounding—and in many cases unpredictable—factors have made repayment difficult.”

Glowiak explains, “The COVID-19 pandemic, inflation, civil unrest, war, an unstable job market, etc. have made it difficult for many to meet even the bare minimum payments. There are also those who struggled to find jobs with their degrees. Some institutions even made false promises.

While the student loan repayment pause has been helpful for those who may have been struggling with repayment, Glowiak notes that people on both sides of the student debt forgiveness debate are feeling some impact. “For those who did receive $10-$20k in relief from the Biden administration’s recent forgiveness, it may prove life-changing,” he says.

Unfortunately, financial stress may have a substantial impact on mental health, as Glowiak highlights that living paycheck to paycheck and struggling to pay bills can feel as if one is constantly operating in survival mode. “What will I pay this month? The mortgage/rent? Groceries? Utility bills? My medical provider and/or prescriptions?” he questions.

Glowiak explains, “This becomes further complicated for those who must provide for their families. Where do they turn? Now, basic needs become compromised. One may feel anxious, depressed, or otherwise have current mental health conditions further compromised.”

In this way, Glowiak notes that one’s self-esteem may be deflated when they feel as though they are “less than” and cannot afford basic things. “Those from oppressed populations who are first-generation graduates may have come into academia feeling as though they broke the cycle of oppression but are still hostage due to repayment of loans. The system continues to repeat itself, and much negativity ensues,” he says.

Glowiak says, “Finances are dynamic. Whether it is personal, [or] within the family, it may be easy to pay the bills one month but challenging to do so another. For many, there is seemingly no escape. The $10,000 does provide some relief, but most are still struggling.”

Read the full Verywell Mind article with sources.