Financial Stress in College Students: What the Research Shows

A 2017 study by Richardson and colleagues followed 454 first-year British undergraduates through a year and found that more financial difficulty predicted worse anxiety and worse overall mental health later on. In a 2004 study, Andrews and Wilding found that depression and financial difficulties mid-course predicted a drop in exam results between first and second year. Financial stress in college students goes with worse mental health, and sometimes with weaker grades.

Both studies are about college students, not high schoolers, and both are observational, so they show links without proving that money worries cause the problems. For parents of high schoolers, these studies describe the years just ahead.

Practice before the first tuition bill

Rapunzl works with students in grades 6 to 12, the years before college. Students manage a simulated $10,000 portfolio and work through project-based modules, in formats that run from a 3-week unit to a 28-week course. They make money decisions and watch the results before real money is involved. Our mission is that every student graduates high school financially literate, ahead of the decisions college brings.

The four studies here are all about college students. No study has tested whether a high school course lowers financial stress once students get to campus, so the practice is our design bet and not a research result.

What does research say about money worries and mental health in college?

We looked at four studies that measured money strain in college students alongside mental health or grades. They are a sample of the research, not a full review. Three link financial strain to how students feel or perform, and one did not find a link to grades.

The first two studies followed students over time, which is a stronger design than a one-time survey. In Andrews and Wilding's sample, 9% of students who had no symptoms before arriving had become depressed at a clinically significant level by mid-course, and 20% had become anxious at that level. The study measured several kinds of difficulty, so money does not explain the whole shift. Even so, financial difficulties were independently linked to depression, over and above how students felt before they started.

Richardson and colleagues add two details. Students who felt more stressed about their debt tended to show worse anxiety and worse overall mental health by the last survey of the year. And the link ran both ways: anxiety and alcohol dependence also predicted a worsening financial situation, which the authors call a possible vicious cycle. Financial difficulties and anxiety may feed each other.

Does financial stress lower college grades?

The evidence is mixed. Andrews and Wilding found that mid-course depression and financial difficulties predicted a decrease in exam performance from first to second year. Cadaret and Bennett found that students reporting more financial stress also had lower GPAs, but their sample was students seeking psychological services, so it describes students who had sought help.

Britt and colleagues point the other way. They surveyed 2,236 students and reported that financial stress was not associated with academic achievement. Their abstract adds a detail that complicates any easy story about knowledge: higher subjective financial knowledge went with higher financial stress, as did fewer financial resources, negative perceptions and lower mastery. The authors recommend adding resources and chances to build financial knowledge, expecting less stress and better achievement. That is their expectation, not a tested result.

Across the four, money strain went with worse mental health in the samples that measured it. Its link to grades appears in some studies and not in others.

What does this research not show?

The first limit is causation. All four studies are observational, so something else, such as a health problem or a job, could sit behind both the money worries and the outcomes. Richardson's team writes that financial difficulties "appear to lead to" poor mental health, but the same paper also found that anxiety predicted later financial trouble.

The abstracts also report that links were found, not how large they were, so this post cannot say how many grade points a money worry costs.

The samples are narrow. All four studies surveyed college students; the two UK samples were entering or first-year undergraduates, and their money pressures may not match those of a US family. Andrews and Wilding's study was published in 2004, so it describes students from an earlier period. The Richardson sample was mostly female and self-selected, and the Cadaret sample was students seeking psychological services.

Most relevant here, none of the four tested whether anything done in high school lowers financial stress in college. That question is open.

What can parents do before college starts?

Families start from different places, so treat these as options. They come from our reading of the studies, not from a tested program.

• Look at the real numbers together, and frame it as planning. Richardson's team asked students how stressed they felt about their debt, and that feeling predicted later anxiety and poorer overall mental health. Start with what the aid offer covers, then the gap, then the options. A number with a plan attached is easier to hold than a number alone; that part is our judgment. Our post on student loan interest rates shows how the math works.
• Say plainly what your family can and can't contribute. No study here tested this, but a student can't plan around a number they don't know.
• Run a trial semester before the real one. Over the last months of senior year, have your teen budget a practice first semester: books, food, transport, phone. A mistake in a spreadsheet costs nothing.
• Check in on money and mood together. Anxiety and money problems predicted each other in one sample, so a call home that covers both is a cheap way to notice trouble early.
• Find the campus financial aid office and the counseling services together before your child needs either one.
• Ask what your child's school offers. If there is a personal finance course, ask what students do in it, and whether they practice decisions or just memorize terms.

Parents who want their teen to practice money decisions before college can see how Rapunzl works for families.

By Myles Gage, Co-Founder and Chief Executive Officer at Rapunzl.