The hidden costs of debt: What 3 experts wish more people understood

If you’ve ever carried a significant balance on a credit card or struggled to pay off a personal loan, you know how anxiety-inducing debt can be. It’s one of the most common financial stressors — 47 percent of people whose mental health is negatively impacted by money cite being in debt, such as credit card debt, medical debt or student loan debt, as a reason why, according to Bankrate’s Money and Mental Health Survey.

But just knowing that debt is stressful doesn’t make it easier to break the cycle and pay off your debt for good. Bankrate spoke to three experts in economic inequality, sociology and social work to better understand how debt and mental health intersect — and how to break the stigma around carrying debt.

These interviews have been edited for length and clarity.

How does debt influence people’s mental health, particularly in ways they may not be as aware of?

Debt is a chronic stressor. Unlike a one-time financial setback, debt tends to linger around and shapes people’s mental and emotional baselines. It can erode people’s sense of control, making them feel trapped, ashamed and powerless over their futures. Even when someone is making payments, debt can create a sense of never being able to catch up — what some scholars call “debt despair.”

— Joseph D. Wolfe, Ph.D.
Associate professor, University of Alabama at Birmingham Department of Sociology

Constantly thinking about something (like debt) taxes cognitive and affective mental bandwidth available to people, which can lead to negative serious mental health consequences. 

For example, thinking about debt may lead to developing negative thought patterns, including constant rumination about their financial situation. These negative thought patterns might create (feelings) of hopelessness or the belief that they will never escape debt. Long-term anger, fear and sadness have been shown to lead to chronic mental health issues, including depression, and anxiety disorders.

— Gaurav R. Sinha, MSW, Ph.D.
Assistant professor, University of Georgia School of Social Work

Debt collection pressure, in particular, is an aspect of debt holding that is commonly experienced by many Americans, especially low-income Americans, and is often stressful. In a recent study co-authored with my colleagues at Ohio State University and Dartmouth College, we found that more than 1 out of every 3 (millennials) had experienced debt collection pressure by age 40 and that experiencing debt collection pressure was associated with increased depression and anxiety symptoms.

— Alec P. Rhodes, Ph.D.
Postdoctoral scholar, University of Wisconsin-Madison Institute for Research on Poverty

Take the first step towards tackling your debt

If you’re in debt, you aren’t powerless, even though it may feel that way sometimes. One small step can be all it takes to begin tackling your debt for good. Consider any of the following starting points:

• Know your sources of debt: Know how much debt you’re carrying and what your creditors are by gathering your documents and account logins. Understanding your sources of debt will get you organized, so you can later make payments on time and make sure nothing will go to collections.
• Determine your minimum payments: While, ideally, you’ll want to pay down your debts as quickly as possible, you should at least be making the minimum payments on all of your debts. Determine your minimum payment with each creditor (they should be listed on your account) and include those payments in your monthly budget, so you can stay on top of payments.

• Reach out to a professional for help: If you need more tools to unpack your relationship with your debt, consider reaching out to a financial therapist. A financial therapist is a licensed therapist who specializes in helping people untangle financial problems, and they can help you get to a place where you’re able to comfortably tackle your debt. If you still have questions about your complete financial picture, you might also want to consider speaking with a financial advisor, who can help you with more specific financial questions around budgeting, retirement, investing and more.

What are some misconceptions about the relationship between debt and mental health?

Rhodes: I think a common misconception about what makes debt depressing or stressful is that it’s not necessarily about the amount of debt that a person owes. Many solidly middle- and upper-class Americans owe large balances on mortgages. But this debt isn’t ordinarily stressful. Mortgages are tied to homeownership and asset building through home equity. In this sense, debt can be supportive of mental health. 

Instead, the bulk of the empirical research suggests that it’s the type of debt and one’s experiences with debt that matter when it comes to the depressing/distressing effects.

Wolfe: One of the biggest misconceptions is that all debt functions the same way. A mortgage taken out under stable financial conditions doesn’t have the same psychological weight as medical debt accrued from an unexpected emergency. 

Research consistently shows that involuntary debt — debt taken on to meet basic needs rather than for investment or choice — is harmful to mental health, but much of the public discourse treats all debt as if it’s a matter of personal responsibility rather than systemic necessity.

Why do I feel differently about different kinds of debt? And how can I begin paying it off?

Like Rhodes and Wolfe said, some debt, like a mortgage, doesn’t always create the same amount of stress that something like credit card debt does. Among many factors, one reason for that could be that credit card debt tends to have a much higher interest rate than a mortgage, creating more pressure to pay it off quickly. Plus, you’re more likely to have a mortgage already included in your monthly budget, so you’re aware of how much you’ll pay in advance, unlike credit card debt, which can fluctuate. There’s also the fact that carrying a large amount of credit card debt has a bigger stigma in the U.S. than a mortgage.

No matter the source, if you’re interested in paying off your debt, there are several ways to tackle it, depending on your priorities. To start paying off your debt, consider how much debt you have and what method you want to pursue. Two common debt payoff methods include:

• The snowball method: Focus on the account with the smallest outstanding balance first while paying the minimum on all other balances.
• The avalanche method: Focus on the account with the highest interest rate first while paying the minimum on all other balances.

You might also want to consider debt consolidation to save more money on interest and pay off your debt more quickly. Debt consolidation rolls multiple credit accounts into a single loan or line of credit, and could be through a balance transfer credit card, home equity loan or debt consolidation loan.

What are effective strategies people can use to reframe their relationship with debt?

Wolfe: Reframing debt starts with shifting the narrative from shame to structural awareness. Debt is not an individual failing — it’s often a symptom of systemic inequities. Understanding that can help people detach their self-worth from their financial circumstances. On a personal level, practical strategies include:

1. Reframing debt as a tool, rather than a reflection of personal failure, can reduce shame and help people make clearer financial decisions.
2. Talking about debt, whether with trusted friends, support groups or financial counselors, can help break the stigma and provide new strategies for management.
3. Instead of fixating on the total amount owed, shifting focus to actionable steps, such as setting realistic repayment goals or negotiating interest rates, can help regain a sense of control.

Sinha: First of all, I would like to say that acknowledging debt and seeking help is not a sign of weakness — it is a healthy way to manage mental health and financial stress. Talking about it can help (alleviate) cognitive and affective overloads and allow people to access resources or emotional support.

How to lower your interest rate

Negotiating your credit card interest rate is just one actionable step you can take towards taking control of your debt. Bankrate's guide will show you how.

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If you could share one thing with someone struggling with debt-related anxiety, what would it be?

Wolfe: You are not your debt. Debt is something you have, not something you are. The financial system was not designed to support everyone equally, and struggling with debt is not a reflection of your worth, intelligence or potential. If you feel overwhelmed, know that shame and isolation only serve the structures that profit from keeping people in debt.

Seeking help — whether financial, emotional or social — is not a sign of failure. It’s a step toward reclaiming control over your life.

Sinha: Debt does not define your worth. The truth is, debt is a situation that can be managed and worked through with time and effort. Seeking help about your debt and mental health does not mean you are weak or unsuccessful. Your mental health matters, and most importantly, you matter!

More about these experts

Bankrate interviewed three experts from universities across the country to get their insights about the intersection of debt and mental health:

Alec P. Rhodes, Ph.D., postdoctoral scholar, University of Wisconsin-Madison Institute for Research on Poverty

Alec P. Rhodes is a postdoctoral scholar at the Institute for Research on Poverty at the University of Wisconsin-Madison. He studies how social institutions and public policies shape poverty and economic inequality, with a focus on labor markets, wealth, credit, debt, and population health. His published work appears in Journal of Health and Social Behavior, Nature Human Behaviour, and Social Problems, among other outlets. He received his Ph.D. in sociology from The Ohio State University.

Gaurav R. Sinha, MSW, Ph.D., assistant professor, University of Georgia School of Social Work

Gaurav Sinha’s research agenda lies at the intersections of poverty, social justice, and mental health and utilizes big data analytics and strengths-based approaches to promote financial and mental health equity. He prefers rigorous and in-depth discussions of methodological approaches in studies that can help in research reproducibility. Sinha’s research interests have evolved from his 16 years of post-Master of Social Work practice experience on reducing the consequences of financial vulnerabilities among invisible populations whose narratives have traditionally been situated at the outer periphery of intellectual and academic inquiry in social work.

Joseph D. Wolfe, Ph.D., associate professor, University of Alabama at Birmingham Department of Sociology

Joseph D. Wolfe is an associate professor of sociology at the University of Alabama at Birmingham. He holds a Ph.D. in Sociology and an M.S. in Applied Statistics from Indiana University Bloomington. A medical sociologist, he studies the social and historical roots of health disparities, the impact of debt on midlife health, and why adult children’s schooling is related to their parents’ mortality risk. His award-winning research has been supported by the NIH and widely published in sociology, public health, and gerontology.