The Emotional Effects of Debt

Debt can cause a lot of damage, and not just to your credit score. It can literally drive you crazy. Get help with credit card debt and find peace of mind.

Choose Your Debt Amount

- OR -

Home > Debt Help Advice > The Emotional Effects of Debt

If you’re currently experiencing a mental health crisis or if you’re considering harming yourself or others, please get help immediately. You can call the free and confidential National Suicide Prevention Lifeline at 1-800-273-TALK or visit your closest emergency room for immediate intervention.

Debt has long been a problem for many Americans, but the unprecedented problems of the past three years have spread the misery to tens of millions more. The COVID-19 pandemic and its aftermath created enormous upheaval in our lives: our health, our jobs, our financial security, among other areas.

More recently, soaring inflation, spiraling gas prices, even baby formula shortages, have piled woe upon crisis upon uncertainty.

And it’s not just the actual lack of money that’s causing problems. A shortage of money led to a massive increase in denial, stress, anger, depression and anxiety. The emotional strain of dealing with debt can be almost damaging as getting your electricity cut off or having your car repossessed or seeing your credit score plunge to where you’ll struggle to  get another loan.

With housing alone, a 2021 report by the Federal Reserve Bank of Philadelphia estimated that about 2 million households owe roughly $15 billion in back rent. A study by the National Equity Atlas put that figure above $21 billion.

Whatever the cost, whatever the cause, debt wreaks emotional havoc on our psyche.

Among the negative effects are low self-esteem and impaired cognitive functioning. That means you can’t learn, remember, be attentive or solve problems as well when you’re under stress because you can’t pay your water bill.

And get this – debt can hurt. I mean, really hurt.

That wasn’t particularly surprising, but a research team discovered that simply thinking about the prospect of financial insecurity was enough to increase pain. People reported feeling almost twice as much physical pain after recalling a financially unstable time in their life compared to those who thought about a secure period.

It’s rare for someone to never have money problems. Trouble happens, jobs disappear, marriages fail, people get sick, their homes lose value and bills just keep piling up. No one is immune, especially during and after a pandemic.

So what came first, the pain or the debt?

Debt and Mental Health

Does debt cause mental illness, or does mental illness cause debt?


That’s the best answer researchers have come up with after years of study. Some research found that worrying about debt triggers stress, which reduces your resilience against mental health problems.

Other studies show mental health problems decrease self-control, increase spending and basically mess up a person’s financial judgment. That would explain why Jack Nicholson didn’t have a checking account in “One Flew Over the Cuckoo’s Nest.”

The term “mental illness” covers a wide range of issues and many degrees of severity. Whether it is a seemingly passing issue or a severe, entrenched problem, it is important to be aware of it, acknowledge it and take steps to address it.

Behavior patterns that compel some to spend without restraint can drive a person into debt just as surely as a financial emergency caused by a car crash. Regardless of how someone falls behind, being in debt can trigger unsettling emotional responses.

Many of these behavior patterns may have their roots in the most fundamental parts of our financial lives. Most student loan borrowers experience a reduction in mental health and increasing anxiety as they realize they can’t pay back student loans or even have to default on the loans.


Denial has long been a way of fiscal life in Washington D.C., but the flow has turned into a torrent due to COVID-19 relief bills and the ensuing inflation crisis.

The national debt surpassed $30 trillion in 2022. The Congressional Budget Office predicted the budget deficit for 2022 will rise another $1 trillion.

Consumers don’t have the luxury of endless deficit spending, though many act as if they do. They spend compulsively while ignoring their deteriorating financial condition. They put off dealing with problems until some outside event – credit denied, threat of foreclosure, legal action, harassing phone calls from debt collectors – forces a change.

Some of the symptoms of debt denial are:

  • Underestimating how much you owe.
  • Not answering the phone when you suspect a collection agency is calling.
  • Leaving bills unopened or just stuffing them in a drawer.
  • Opening a new credit card when your old one is maxed out.
  • Telling yourself that everyone is in the same situation.

Such behavior just leads to more debt as interest charges and late fees pile up. But ignoring reality is a handy defense mechanism for the brain. It’s a way to rationalize mistakes and protect your ego. The problem is reality always sets in.


It’s the opposite of denial, and there’s plenty of it based on debt-management statistics. Debt and stress are like co-joined twins.

The average credit card debt for American families is $6,569, according to a 2022 study by Lending Tree.  Overall, Americans owe $841 billion across almost 506 million credit card accounts.

The strongest predictor of financial strain is credit card debt, according to a study published in the October 2020 edition of Aging & Mental Health. It found that for every $10,000 in credit card debt, the odds increase 65% that the borrower would report trouble paying monthly bills. The likelihood they’d report ongoing financial problems increased 50%.

About 40% of consumers who have had credit card debt said it affected their general happiness. One-third said it negatively affected their standard of living, and 1 in 5 said it harmed their health.

Stress can lead to adverse changes in behavior. That is as true of financial stress as any other kind of stress. Stress from debt can lead to chronic stress, which in turn increases the chances of drug and alcohol abuse and increases the suicide rate. A study published in 2021 in the American Journal of Epidemiology concluded that people under acute financial stress are 20 times more likely to make an attempt on their lives.

That is stress in action.

So what exactly is “stress?”

The term was coined by endocrinologist Hans Selye in 1936, who defined it as “the non-specific response of the body to any demand for change.”

In modern financial terms, that means you hyperventilate when the Visa bill arrives.

Stress may be hard to define, but it manifests itself in obvious ways – lack of sleep, loss of focus, nagging worry.

It can affect big things like your job, since you fear losing it would make your financial situation even worse. It can affect small things like lunch, since you feel guilty for ordering a $2.19 iced tea instead of water. You don’t need an endocrinologist to tell you that’s no way to live.


This is stress with the scab torn off. The thought of getting a late payment notice doesn’t just make you uncomfortable, it gives you a rapid heartbeat, shortness of breath, dry mouth, a headache and the shakes.

On top that, debt gives skittish people one more reason not to walk down the marriage aisle. Researchers at the University of Wisconsin found that high levels of debt contributed to reduced marriage rates among young adults.

And once people got married, their money problems didn’t go away. A 2021 CNBC report said that 54% of Americans thought debt was a reason for divorce. Debt was not “the most pertinent reason for divorce,” but money problems “increased stress and tension within the relationship.”

Similarly, a 2019 report in the Journal of Family and Economic Issues found that each additional $1,000 in student loan debt with 6% higher odds of financial worry, and each additional $1,000 in credit card debt with a 4% higher chance of financial worry.

Considering the average student loan debt was $37,014 in 2022, that adds up to a lot of sleepless nights.

The National Institute of Mental Health estimates 40 million Americans suffer from anxiety. Financial worries are a massive trigger for those disorders.

You assume the worst, like that you’ll be homeless if your house gets foreclosed, or your car is going to break down on the way to work and you’re going to get fired for being late.

Nobody wants to live like that.

And apparently, they don’t want to marry anyone who lives like that, either.


As the economy sags, anger issues rise. The phenomenon got its own name in medical circles: Debt-Anger Syndrome.

Instead of panicking or denying problems, victims get mad. They are mad at creditors who continually send them bills; mad at the mailman for delivering the bills; mad at their bosses for not paying them more; mad at their spouses for not making more money; mad at their kids for needing new braces; and mad at themselves for getting into this fix.

In short, they are mad at life.

This not only can ruin relationships, the physiological effects can lead to migraines, heart disease and reduce your resistance to infections.

Somewhat surprisingly, suicide rates actually dropped during the pandemic. The Centers for Disease Control reported suicides in the U.S. were down 6% in 2020. That was the largest annual drop in almost 40 years.

Researchers aren’t sure what led to the welcome decline, since overall mental-health issues skyrocketed due to the shutdown. They speculate increased treatment availability helped, along with a different overall perception of suicide.

With so many people suffering emotionally, the stigma associated with seeking medical help decreased. That suggests the first step is self-awareness. If you are experiencing financial difficulties, know you have a lot of company, and recognize the possible impact on your health, mood, and well-being. Seeking help from mental health professionals is as natural as seeking help from financial experts.


People deny, freak out and lash out over debt. After they work through those stages, the bills are still staring them back in the face. That’s when depression sets in.

It spread like a virus during the pandemic. A 2020 Kaiser Family Foundation (KFF) Health Tracking Poll found that households experiencing income or job loss caused them to experience at least one adverse effect on their mental health. That included difficulty sleeping or eating, increases in alcohol consumption or substance use, and worsening chronic conditions.

Hopelessness sets in, as does low self-esteem. It can lead to even more debt, since sufferers sometimes try to relieve their depression by treating themselves to a shopping spree or some other mental getaway. Depression does not discourage impulse spending; in fact, it has the opposite effect.

But all that does is lead to more debt, which leads to more depression and despair. At that point, people don’t care whether their pain is caused by debt or debt is causing their pain.

They just want the pain to end.

Debt’s Effects on Physical Health

There is no wall between your mental and physical health. The two overlap and affect each other in ways both good and bad.

When debt and stress are involved, the effects are seldom positive. Debt and stress can affect your physical health in a number of ways, including but not limited to:

  • Blood pressure, which is also influenced by diet and overall condition. Add stress and this can become a serious problem.
  • Heart rate, which can also affect your heart’s rhythms, which can in turn lead to stroke and other events.
  • Immune system functions, which have been very much in the news during the pandemic.
  • Mood, which has consequences internal (like your mental wellness) and external (such as your important relationships).
  • Memory, which can be impacted and which then can create further stress.
  • Weight gain or loss, which has implications for blood pressure and heart health.

Negative Effects of Debt on Young Adults

Debt is aggressively egalitarian, eager to afflict anyone regardless of age, race, education level or personal resources. Each of those groups, however, handles debt and its related challenges in different ways.

Those challenges are especially daunting for young people, who increasingly begin their adult lives with crippling student loan debt that affects every other aspect of their lives. These unique challenges give rise to unique kinds and levels of stress.

A study published by Silvercloud Health underscored the impact of debt and financial difficulty on the mental health of people aged 18 to 24. Those ages marked the parameters of the survey, but there is no magic cutoff at age 25. The lesson is that earlier debt obligations lead to earlier struggles to cope with debt, both financially and mentally.

The Silvercloud study showed:

  • 24% of those surveyed reported they’ve already experienced financial difficulties and debt.
  • Of those, 81% said debt negatively affected their mental health.
  • 31% have sought mental health support.
  • 84% feel general anxiety about their future.
  • 69% are worried about unpaid bills.

While there are no easy solutions for these challenges, it is important to address them. Developing a healthy, proactive strategy for handling financial problems before they spiral out of control can help young people navigate the deeper, rougher seas ahead.

Negative Effects of Debt on Older Adults

If younger people are stressed by incurring early debts such as student loans and car payments, the older generation faces a different set of pressing issues.

Debt accumulated over decades of living – mortgages, credit cards, personal loans – can create a crisis for those approaching retirement age, or even those trying to plan for their eventual retirement.

Retirement savings typically require discipline and restraint, two things that are undermined by debt, and which debt, in turn, undermines. Significant debt can make it difficult to prioritize retirement savings over debt payoff. Simply put, there are fewer financial assistance options for seniors.

A 2018 study called “The Graying of U.S. Bankruptcy,” published by the Consumer Bankruptcy Project, blamed the weakening of the social safety net – including Social Security and Medicare – along with rising costs for healthcare, prescription drugs and other expenses, for a dramatic rise in bankruptcy filings by Americans over age 65.

Between 1991 and 2018, the percentage of bankruptcy filings be seniors rose over 500%. With Florida Senator Rick Scott pushing for the elimination of Social Security, these numbers may rise even more alarmingly.

» Learn More: Avoid Debt as a Senior – Resources for Economic Security

Advice on Managing Financial Stress & Debt

The ideal way to deal with debt-related stress is to avoid it. While that sounds impractical, there are ways to cope with stress by developing strategies and financial habits that can reduce both debt and stress:

  • Writing down debt: To help address your debt, it helps to know when you have too much debt.
  • Identifying your debt: Once you make a list, analyze it. You need to know which debts are unsecured and which are digging the hole deeper with high interest rates.
  • Prioritizing what debts are most important: Your home is more important than your department store credit card. It isn’t always that obvious, but you can make sure your first payments address your most important needs.
  • Set a budget: This is where the discipline comes in. Once you have a good idea of your monthly obligations, it is important to make – and stick with – a plan to meet them.
  • Cut expenses: This is the more difficult aspect of sticking to a budget – eliminating unnecessary costs.
  • Identify spending habits: Do you need that third TV streaming service? Can you get by with ads on your music streamer instead of that monthly fee? There are apps and websites that help you itemize the automatic monthly payments you have signed up for.
  • Start paying down debt: Once you have organized your finances, stick with your plan. When there is unexpected money, throw it at your debt rather than throwing it away.
  • Seek help for mental health: If all your efforts don’t lower your stress levels, or if all that focus on your debts actually increases your stress, don’t try to deal with it alone.
  • Pay new bills immediately if possible: Adding to your debt load is the opposite of lowering your debt load.
  • Seek help from Debtors Anonymous.

» Learn More About: 11 Mistakes to Avoid When You’re Trying to Get Out of Debt.

Seek Help from Mental Health and Financial Professionals

If financial difficulties such as debt are causing stress, depression and other mental health concerns, and mental health concerns are making it tougher to deal with financial difficulties – well, that is a spiral that you must find a way to slow down and stop.

Help is available in both areas. There are qualified experts who can provide counseling and advice about debt, and there are professionals equipped with strategies to alleviate mental health issues.

For the latter, a good first step is your doctor or other medical professional. They may be able to help with minor mental health issues, or refer you to a therapist or psychiatrist qualified to work with more severe issues. The coping mechanisms they offer can help when dealing with debt and other financial worries.

There are options to receive financial assistance to address mental health issues, so don’t let money be a barrier to treatment.

One path to good mental health is dealing with the stress-causing issues directly. There are plenty of good debt-relief options available:

  • Credit Counseling provides advice from qualified experts who will help create a plan to deal with your specific issues. Credit counseling services are often nonprofit and FREE of charge.
  • Debt Management Programs are designed to combine credit card payments into one monthly payment with a lower interest rate. Such programs are offered by nonprofit credit counseling agencies.
  • Debt Consolidation also gathers unsecured debt like credit cards, and pays them off by taking out a loan from a bank, credit union or online lender to pay off the credit cards. You still must repay the loan, but the interest rate should be considerably lower and you’re only writing one check, instead of multiple checks.
  • Debt Settlement is paying less than what you owe. Achieving that is difficult and time consuming. Lenders are not obligated to accept settlement offers. It often takes 3-4 years to reach a settlement with those who do. By that time, the late fees and interest payments increase the balance you owe so dramatically that a settlement may only be for 10%-20% of what you originally owed. And debt settlement is a stain on your credit report that can lower your score 100-200 points.
  • Bankruptcy protection comes in a couple of different packages, but it should always be considered as a last resort when other options have not been successful. If there is no way to repay your debts in five years or less, bankruptcy might be the best option.

Whichever road you take toward debt reduction and resolution, one benefit is likely to be a reduction in the stress and anxiety that may have led to depression or more serious mental health issues. Lifting the burden of debt from your shoulders will leave you with more financial freedom and more discretionary income to enjoy it with.

About The Author

Bill Fay

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].


  1. Schulz, M. (2022, March 6) 2022 Credit Card Debt Statistics. Retrieved from
  2. Eric B. Elbogen, et al; American Journal of Epidemiology; July 22, 2020:
  3. Hanson, M. (2022, May 30) Student Loan Debt Statistics. Retrieved from
  4. Reinicke, C. (2022, January 29) Student loan debt hurts the mental health of most borrowers, survey finds: Retrieved from
  5. East, S. (2022, May 11) How Debt and Financial Stress Affect Your Mental Health and Ways to Cope: Retrieved from
  6. Marter, J. (2021, November 12) How to Manage Anger Resulting From Financial Stress: Retrieved from
  7. Loconti, C. (2021, August 18) How to Feel Less Anxious About Money: Retrieved from
  8. Shaw, G. (2019, January 31) These are the 11 most common reasons people get divorced, ranked. Retrieved from
  9. Panchal, N., Kamal, R., Cox, C. (2021, February 10) The Implications of COVID-19 for Mental Health and Substance Use. Retrieved from
  10. Zhang, Q., Hyungsoo, K. (2018, December 14) American Young Adults’ Debt and Psychological Distress. Retrieved from
  11. Reed, D., Divringi, E. (2021, July 30) Household Rental Debt During COVID-19: Update for August 2021: Retrieved from
  12. Rahman, K. (2021, July 28) As Eviction Moratorium Expires, Americans Owe $20 Billion in Unpaid Rent: Retrieved from