AN EXAMINATION OF THE PSYCHOLOGICAL CONSEQUENCES OF FEDERAL STUDENT LOAN DEBT AMONG BORROWERS

CHAPTER ONE INTRODUCTION 1.1 Background of the Study In Nigeria, pursuing higher education is commonly viewed as a crucial step toward improving employment opportunities and achieving better socio-economic status. However, the cost of obtaining a tertiary education has been rising steadily, which has led many students to turn to financial assistance through loans. To make higher education more accessible, the Nigerian government has introduced student loan programs. Despite this, concerns have emerged about the potential long-term psychological effects these loans may have on recipients. Over recent years, Nigeria’s higher education system has expanded considerably, marked by a significant increase in enrollment at universities and other post-secondary institutions. Unfortunately, government funding has not kept pace with this growth, making student loans a necessary resource for many. To help bridge this financial gap, the Nigerian Students Loans Board (NSLB) and similar support programs were established to promote wider access to education (Adelakun, 2023). Globally, debt has been linked to a variety of psychological challenges, including stress, anxiety, and depression (Sweet et al., 2013). In Nigeria, the combination of economic hardship and societal pressure to succeed academically and professionally may amplify these effects. Student loan debt often imposes a heavy emotional burden on borrowers, affecting their mental health and overall well-being. Given Nigeria’s high unemployment and underemployment rates among graduates, many borrowers experience intensified stress related to their ability to repay these loans (Ogunyemi & Olaleye, 2022). The pressure to secure stable employment to meet loan repayments, coupled with fears of financial failure, contributes significantly to elevated anxiety and tension (Edewor, 2023). Depression is another serious issue linked to student loan debt. Research indicates a strong connection between financial stress and depressive symptoms (Schieman & Glavin, 2011). In Nigeria, where mental health services are limited and social stigma around mental illness remains high, the financial burden of debt can lead to untreated depression and other psychological conditions (Adewuya & Oladipo, 2023). Furthermore, the weight of student loan debt often influences major life choices and overall quality of life. Financial constraints commonly delay important milestones such as marriage, homeownership, and starting a family, all of which can affect personal happiness and social stability, thereby further impacting mental health (Ibrahim, 2022; Nwosu & Akintoye, 2023). Cultural and social factors also play a role in shaping how student loan debt affects mental health in Nigeria. Family expectations and societal pressures can heighten stress levels among borrowers. In many Nigerian families, education is viewed as a collective investment, with graduates expected to support their families financially. This cultural norm often places additional pressure on students to take on significant loan debt, increasing their financial and emotional burden (Oluwaseun, 2023). Recent studies have started to shed light on these psychological impacts. For instance, a 2023 study by the Centre for Economic Analysis found that 60% of student loan borrowers reported significant stress and anxiety directly related to their debt (Centre for Economic Analysis, 2023). The COVID-19 pandemic has further exacerbated financial uncertainties, highlighting the urgent need for expanded mental health and financial support services (Adeleke, 2023). This study therefore aims to explore the psychological effects of federal student loan debt on Nigerian borrowers. 1.2 Statement of the Problem The rapid expansion of tertiary education in Nigeria, combined with inadequate government funding, has resulted in growing reliance on student loans to finance education. The responsibility of managing and repaying these debts can cause substantial psychological distress. Research shows that individuals burdened by large student loans often experience higher levels of anxiety, depression, and financial strain compared to those without such debts (Walsemann et al., 2015). The ongoing worry about repayment and fear of default may worsen mental health problems, deteriorating overall well-being. Moreover, the rising incidence of mental health issues among borrowers is alarming. Studies indicate that the financial burden of student loans may lead to increased stress, lowered self-esteem, and greater vulnerability to mental illnesses (Dwyer et al., 2020). Because repayment periods can extend well into middle age, borrowers may face prolonged periods of anxiety and concern, with lasting consequences for their mental health. Despite these risks, there is a lack of comprehensive research documenting the psychological effects of student loan debt on Nigerian borrowers, leaving a significant gap in knowledge. This study intends to address this gap by investigating the psychological impact of federal student loan debt on borrowers. 1.3 Objectives of the Study The primary objective of this research is to examine the psychological effects of federal student loan debt on borrowers. Specifically, the study aims to: i. Assess the prevalence of depression among borrowers with federal student loan debt. ii. Determine the impact of federal student loan debt on borrowers’ levels of anxiety. iii. Analyze the coping strategies borrowers employ to manage the psychological stress caused by federal student loan debt. 1.4 Research Questions The study is guided by the following questions: i. What is the prevalence of depression among borrowers with federal student loan debt? ii. How does federal student loan debt affect borrowers’ anxiety levels? iii. What coping mechanisms do borrowers use to handle the psychological stress associated with federal student loan debt? 1.5 Significance of the Study This research will provide valuable insights for mental health practitioners by highlighting the unique psychological challenges faced by individuals with student loan debt. Such knowledge can improve the design of counseling and support services tailored to borrowers’ specific needs, helping them develop effective strategies to cope with financial stress. Additionally, this study will enrich academic literature on the subject, contributing important data for further research and policy development. 1.6 Scope of the Study This study focuses on the federal student loan program in Nigeria and its psychological effects on borrowers. Empirically, it will measure the prevalence of depression, assess anxiety levels, and explore coping mechanisms among students and graduates with federal student loan debt. Geographically, the research is limited to the University of Lagos in Lagos State. 1.7 Limitations of the Study As with any research effort, this study faced some challenges: Time: The researcher had to balance this study with other academic responsibilities such as attending lectures and completing coursework, which limited the time available. Financial Constraints: Costs related to printing, sourcing materials, and data collection placed financial pressure on the researcher. Availability of Materials: Due to the relatively new focus on the psychological impact of student loan debt, relevant literature was scarce, limiting the depth of the review. 1.8 Definition of Terms Federal Student Loan Debt: The total borrowed amount from the federal government by students to cover postsecondary education costs. This includes loan types such as Direct Subsidized Loans, Direct Unsubsidized Loans, and PLUS Loans. Borrowers: Individuals who have taken federal student loans to finance their education, including both current students and graduates who are repaying loans. Psychological Effects: The impact on mental health and emotional well-being, including symptoms like anxiety, depression, and stress. Anxiety: Feelings of worry or nervousness about uncertain outcomes, particularly concerning loan repayment and financial stability. Depression: A mental health disorder characterized by persistent low mood and loss of interest in activities, often accompanied by changes in sleep, appetite, or energy. Financial Stress: Anxiety and strain caused by financial difficulties such as managing debt, meeting financial obligations, and paying bills.