India's Hidden Student Loan Burden: An Unaddressed Concern
India's student loan crisis is not just a financial burden, but also a significant contributor to mental health challenges among students and their families. The crisis, driven by repayment stress, social stigma, and societal pressure, is manifesting as a growing mental health concern, with cases of humiliation and tragic outcomes linked to debt burden.
Mental Health Implications
The pressure to repay large loans, amplified by societal and familial expectations to secure a prestigious education, often leads to stress and anxiety among students. The stigma and silence around loan repayment difficulties exacerbate feelings of isolation and helplessness. Rising defaults and delinquencies create uncertainty about the future, worsening psychological distress. For families, particularly those who borrow heavily for overseas or private education, the financial burden translates into chronic stress affecting overall well-being.
Context of the Crisis in India
Educational loans outstanding reached ₹96,847 crore in early 2024, with a marked rise in high-value loans (above ₹7.5 lakh), mostly for studies abroad. States like Tamil Nadu, Kerala, Maharashtra, and Gujarat lead in disbursement, with Gujarat showing a 6.5% increase in loan amounts in FY 2025 but only a small increase in debtor numbers, signaling reluctance to take on more debt. More general category students are availing government loans for foreign education, with a 168% increase over five years, indicating growing demand but also potential for rising debt stress.
Potential Solutions
Addressing the mental health dimension of India’s student loan crisis requires integrating financial reforms with targeted mental health support and stigma reduction. Proposed solutions include offering lower interest rates and flexible repayment terms, expanding government-backed loan schemes, implementing financial literacy programs, providing mental health counselling, reducing stigma, considering loan restructuring and moratorium options during joblessness or economic hardship, introducing regulations for fair lending practices, facilitating better job placement programs, and encouraging income-driven repayment plans.
India's student debt is causing emotional and financial strain, and the number of borrowers is growing. A multi-pronged approach combining financial, social, and psychological interventions may be beneficial to address India's student debt dilemma. Parents or guardians who co-signed the loans often face harassment or legal action if the student is unable to repay. Some students have experienced sudden hikes in interest rates, with rates as high as 18%. Many students end up with private lenders due to stringent eligibility criteria and lengthy approval processes at public sector banks. The government's program, Credit Guarantee Fund for Education Loans (CGFEL), provides a safety net for loans up to ₹7.5 lakh, but few students use it. The disparity in interest rates between government banks and private lenders is significant. Interest subsidies aimed at economically weaker sections also have low usage due to delayed disbursals, low awareness, and paperwork hurdles. The user who took a ₹40 lakh loan for an MS in the U.S. is paying ₹66,000 per month in EMIs, which is more than half their salary.
In conclusion, the mental health dimension of India’s student loan crisis is significant but remains under-discussed. Addressing the problem requires integrating financial reforms with targeted mental health support and stigma reduction to ensure students are not left isolated under debt-related pressure.
- The mental health implications of India's student loan crisis extend beyond financial strain, as the pressure to repay loans contributes to stress, anxiety, and feelings of isolation among students.
- Careers and education-and-self-development are affected by the student loan crisis, as the stigma and silence around repayment difficulties prevent students from seeking advice and support, leading to potential mental health issues and delayed personal growth.
- Health-and-wellness, finance, and science play crucial roles in addressing the student loan crisis, as mental health support, financial reforms, and research into fair lending practices are essential for reducing the burden on students, families, and society as a whole.
