How Conquering College Debt Can Make You Just as Happy as Getting a Raise

pay raise

Want to be happier? Paying down your student loan debts could help, according to a recent study from Purdue University.

Money is a major source of stress for Americans. In fact, money is the most common source of stress for American adults, according to the American Psychology Association’s Stress in America study released earlier this year.

Debt, in particular, can increase stress and hurt overall well-being, the Purdue University study found. In fact, college graduates without student debt are almost as likely to be happy as those with the highest incomes.

In other words, paying off student loans can make you happier — as happy as if you’d just been given a pay raise.

Student debt tied to stress and depression

“There has been a lot of research looking at whether and how income makes people happy in life,” said Louis Tay, an assistant professor of psychological sciences at Purdue University, in a statement.

“But few studies have examined whether debt can detract from happiness,” Tay explained.

The Purdue study found that debt commonly has significant, negative effects on well-being. These effects are more prominent with higher debt levels, lack of financial resources, and certain sources of debt.

The study also surveyed college graduates about their debts, income, and well-being. The results show higher incomes are tied to better well-being and life satisfaction.

Debt, on the other hand, correlates with more stress. And an overall worse sense of well-being.

“We found that carrying student loan debt is almost as important as income in predicting financial worry and life satisfaction,” Tay said.

Therefore, decreasing student loans will make you about as happy as getting a pay raise.

Another recent study from the University of South Carolina also found that student loans can be linked to higher levels of depressive symptoms.

“We are speculating that part of the reason that these types of loans are so stressful is the fact that you cannot defer them, they follow you for the rest of your life until you pay them off,” said Katrina Walsemann, the lead author of the University of South Carolina study.

Student loan stress can also worsen your work performance.

A survey from the Society for Human Resource Management found that financial stress had a negative impact on workers’ performance and productivity. Two-thirds of employers say their workers are struggling with debt, the most common source of financial stress identified in the survey.

The payoffs of paying off student debt

Many student loan borrowers struggle with repayment because many of them are facing payments they can’t afford.

A recent Student Loan Hero study found that in every state, student loan payments exceeded the threshold of affordability (equal to or less than 10 percent of disposable income).

But being proactive and effectively using financial resources to pay down student debt can help. What’s more, getting rid of student debts ahead of schedule can have big payoffs for your finances, well-being, and even health.

Increase cash flow like a pay raise

Every time you pay off a student loan, you’re also getting rid of a monthly payment. So it makes sense that paying down student debts would have a similar effect as getting a raise.

Essentially without this loan payment, you’re lowering your monthly financial obligations and increasing your cash flow.

For example, for every $1,000 you save on what you originally borrowed and repaid, you have an extra $10-12 dollars in your budget each month.

That’s equal to a gross pay raise of $13 a month. Or, $158 a year.

Check out our calculator below to see how much you could save on interest when you prepay your student loans, too.

Student Loan Prepayment Calculator

Student Loan Prepayment Calculator

Total current balance

Average interest rate

Current monthly payment

Please choose one:

How much extra do you want to pay on your monthly payment?

Student loan refinancing rates as low as % APR. Check your rate in 2 minutes.

Get a guaranteed return

Paying down student debt can also be looked at as a smart investment.

Prepaying debt has a guaranteed return of helping you avoid years’ worth of interest costs. And these savings, unlike returns on a stock portfolio, are guaranteed.

Improve emotional and physical health

Of course, the well-being benefits of paying off debt are significant, as well.

Paying off debt can provide immense emotional and mental relief. It can also improve your health and immune system, and lower your risk of ailments like headaches or high blood pressure, according to

Getting rid of debt and lessening financial stress can also help you perform better at work.

Achieving freedom from debt can allow you to focus more mental energy and willpower into your work. This, in turn, can increase your chances of earning a raise and advancing your career.

If you’re overwhelmed by student debt

Prepaying student loans is a worthy goal and one you should work towards.

But it’s also one that takes several months or years to accomplish. In the meantime, you should also focus on improving your mental health and lowering your stress.

Look ahead, one step at a time

First off, it’s important to know what’s not helpful or productive.

Feeling like a failure or beating yourself up over your debts doesn’t do anything to improve your situation. And it can increase your financial stress.

If you have student loan debts that doesn’t make you a failure, even if they’re really high. It makes you one of the 44.2 million Americans with student loans.

And maybe you’ve made some financial missteps along the way. But that’s also pretty typical and even normal. Focus on what you can do about it now instead of what you could’ve done in the past.

Don’t feel like you have to conduct a complete overhaul of your finances and debts overnight, either. Repairing your finances and building financial stability will take time.

It’s essential for you to start small, one step at a time. From making a get out of debt plan to reworking your budget, keep your efforts slow but steady. This will help you avoid burnout and create real financial change that can last.

Consider restructuring your student debts

If you are in danger of missing student loan payments or have already had issues making payments, that’s a sign that you might need to restructure these debts.

Luckily, there are a few options you can look into to help make your student debts more manageable.

Income-driven repayment plans can help if your monthly payments are too high, or your income is too low, for you to realistically pay them each month. Plans like Pay As You Earn (PAYE) can be used to reset monthly payments to match your level of income and costs of living.

And if you have decent credit, you could benefit from refinancing student debts through a private lender, like SoFi for example. You could find significant savings by securing a lower interest rate, and could also choose a repayment period that could lower your monthly payments.

Start Your SoFi Application Today

Take care of your health

Responsibly managing your debts can help lower your stress and make your debts feel manageable. That is an important step to lowering stress.

But there are other effective ways to manage stress and improve well-being.

Connecting with friends and family is one of the most effective stress-reducing behaviors, according to Psychology Today. Sufficient sleep and regular exercise can improve well-being and offset stressors like student debt.

So before you begin to feel overwhelmed by your student loan debt, take stock of all of your options and support systems. Then make a plan and just take it one day at a time.

Interested in refinancing student loans?

Here are the top 6 lenders of 2018!
LenderRates (APR)Eligible Degrees 
Check out the testimonials and our in-depth reviews!
2.58% - 7.25%Undergrad
& Graduate
Visit SoFi
2.99% - 6.99%Undergrad
& Graduate
Visit Laurel Road
2.57% - 6.32%Undergrad
& Graduate
Visit Earnest
2.57% - 7.25%Undergrad
& Graduate
Visit CommonBond
2.56% - 7.82%Undergrad
& Graduate
Visit Lendkey
3.11% - 8.46%Undergrad
& Graduate
Visit Citizens
Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.