Survey: Loan Forgiveness Doesn’t Help Suicidal Ideation Due to Student Debt

Federal student loan borrowers who are stressed or struggling with student loan debt might be able to pursue student loan forgiveness. Through the Public Service Loan Forgiveness Program (PSLF) and income-driven repayment options, student loan forgiveness can be a viable path after a decade in public service or after 20 to 25 years of making consistent, low monthly payments.

There’s no doubt that student loan forgiveness is a major perk for federal loan borrowers, despite much of the bad press it's received in the past few years. Even though these programs are a benefit, our latest 2021 Mental Health Survey revealed that forgiveness programs actually had little impact on improving mental health.

Public Service Loan Forgiveness and suicidal ideation

Thirty-five (35%) percent of survey respondents noted that they’re planning to pursue PSLF.

This program differs from income-driven repayment forgiveness in that it has a shorter 10-year timeline for eligibility and the forgiven amount isn’t considered taxable income.

It also requires you to work at a qualified nonprofit, government or public service organization, likely with low pay compared to the private sector. Despite the low wage, having the option for forgiveness can be a relief for those with thousands of dollars in student debt.

However, our survey data illustrates that these forgiveness options aren’t alleviating many borrowers’ mental health concerns. Out of all the struggles we mentioned in the survey such as depression, anxiety, hopelessness, the most dire was suicidal ideation (though, of course, all could be interrelated).

We found that suicidal ideation still occurs among borrowers pursuing PSLF. Plus, we found a link between debt-to-income ratio and higher instances of suicidal ideation.

How debt-to-income ratios impact borrowers pursuing PSLF

Suicidal ideation risk doubled among those pursuing a forgiveness plan if they owed more than two times what they earned. So even if there was a “light at the end of the tunnel” from loan forgiveness, the stress of having a high debt-to-income ratio — in other words, owing more than two times what you earn, still lead to harmful mental health consequences, such as suicidal ideation.

Imagine earning $60,000 annually but you owe $150,000 in student loan debt. Knowing that you’d have to allocate more than two years of your annual salary to pay off your debt can feel insurmountable for many.

Having a plan for your student loan debt does help, though.

Our survey data showed that 1 in 15 respondents know which plan they were using and experienced instances of suicidal ideation. That number jumped to 1 in 11 respondents if they didn’t know what repayment plan they were on. In other words, knowing about the repayment plan and forgiveness program you’re on can certainly help, but doesn’t get rid of the problem.

What the data really means

Over the past year, the federal government has stepped in with necessary measures like putting student loan payments and interest charges on a freeze. However, in general, that didn’t seem to alleviate anxiety.

In our survey we asked, “Has the payment and interest freeze eliminated your student loan anxiety over the past 12 months?” and 42% of respondents said “no”. That’s a good chunk of people who didn’t find relief with such measures.

Similarly, even on a forgiveness plan, borrowers still felt mental health struggles, going so far as experiencing suicidal ideation. That likelihood skyrocketed when tied to a higher DTI ratio.

In general, we saw lower levels of suicidal ideation among all our respondents who had a lower DTI. For example, 1 in 11 respondents who owed more than two times their earnings experienced suicidal ideation. That number dropped to 1 in 26 for borrowers who owe less than what they earn.

Given this data, we believe that adding more income-driven repayment options, eliminating the tax bomb, and making forgiveness more generous might not alleviate the mental health burden, at least in a significant way.

Instead, widespread cancellation without any hoops to go through — such as working 10-years in public service — could be far more beneficial from a mental health standpoint. Additionally, more systemic and policy changes from academia can have a huge impact. For example, if schools start regulating their ever-increasing tuition costs and there are caps on borrowing limits, the student loan landscape might be more equitable.

As it stands, the price of a college education has far outpaced wages. Among a 10-year period from 2007-2008 to 2017-2018, tuition costs rose 31% at public schools and rose 23% at private schools. According to 2019 Economic Policy Institute data, in the past 40 years, only 10 years had positive wage growth.

The main problem with student loans and mental health is borrowers were promised that working hard, going to school, and earning a degree would lead to a “good” job with a salary that’d make it possible to pay back student debt. However, the reality is the cost of education has consistently gone up while wages haven’t. There’s a gap in what borrowers are sold versus what they can actually afford.

Reducing interest rates can be useful but it needs to be combined with regulation around tuition costs. Research from the New York Federal Reserve shows that many schools benefit from low interest rates by increasing their tuition and fees.

The bottom line

Student loan forgiveness can be a lifesaver. However, when looking at student loan policy and the real-life mental health impact it has on borrowers, loan forgiveness doesn’t have as significant of an impact as you might expect.