College graduates earn, on average, about $23,000 more per year than those with only a high school diploma. For college students, completing their degree on time is often helpful for securing a stable livelihood and for families to achieve financial well-being. Despite these benefits, many students struggle with significant financial pressures such as rising tuition, housing costs, and living expenses, which can jeopardize their ability to finish college.[1] Financial stress not only affects academic performance but can also directly lead to dropping out. With rising tuition and reduced financial aid, many are forced to rely on loans to pay for their education,[2] which greatly increases the difficulty of graduating on time.
To explore the relationship between financial stress and academic performance, Dr. So-Hyun Joo and colleagues conducted an online survey at a large public university in the southwestern United States, with 540 student participants.[3] The researchers found that financial stress does indeed increase dropout rates and reduce the course loads students take. They further identified factors that prompted students to drop out or reduce their academic workload due to financial reasons.
Specifically, here are several factors that can influence delayed graduation among college students:
1. Rising tuition and living costs
Each semester, many students feel the heavy burden of tuition payments. Research shows that two-thirds of college students worry about being unable to afford their education.[4] This concern not only creates psychological stress but also impacts academic performance and graduation plans. To ease financial pressure, many students choose to work part-time. However, students who work more than 20 hours per week face a significantly higher risk of dropping out.[5] In addition, full-time jobs or long commutes further cut into study time and add stress.[6] Many students rely on loans and credit cards to pay tuition costs, but research shows that high debt and financial instability are closely linked to academic interruption.[7] In other words, loans may offer short-term relief but can slow down academic progress in the long run.
2. Conflicts between academics and life events
College is not only about academics—it is closely tied to transformative moments in a student’s life. Some students experience major life events (such as marriage, childbirth, or taking on family responsibilities), which may force them to postpone or suspend their studies.2
3. Financial stress and debt issues
Credit cards and loans provide many students with short-term financial flexibility, but at the cost of high debt and long-term psychological pressure. Research shows that financial stress is not only related to debt levels but also significantly lowers students’ academic performance and persistence.[8]
These factors can create long-term financial anxiety, increasing feelings of stress and helplessness, which in turn undermines motivation and focus.[9] In other words, financial problems are not only an economic challenge but also a challenge for both academic success and mental health. Let’s get to some practical suggestions to help students better manage financial stress within their academic responsibilities.
Takeaways:
1. Plan ahead for educational costs
Before entering college, students and families should clearly understand tuition, living expenses, and other related costs and prepare a budget in advance. This helps avoid situations where students “run out of money halfway through” and allows for a reasonable balance between study and work.
2. Take advantage of financial education and counseling services
Many universities not only provide scholarships and financial aid but also offer broader financial education and counseling. These services often include:
- Cash management and budgeting
- Responsible use of credit cards and loans
- Long-term academic and degree financial planning
Research shows that students who receive financial education perform better academically and persist longer.[10] Therefore, students should actively use these resources instead of relying solely on loans. There is a free website, CashCourse by NEFE, that offers lessons and tools on budgeting, credit, and saving to help college students improve their financial literacy.
3. Address and manage financial anxiety
- Use school resources: Counseling centers can help students learn stress management and emotion regulation. Seeking help early can ease anxiety more quickly.
- Build financial skills: Creating a budget, using credit cards wisely, and managing part-time work effectively can all reduce stress.
- Develop a support network: Sharing concerns with friends, family, or student groups can provide emotional support and sometimes practical financial advice.
In other words, financial anxiety cannot be solved simply by “earning more money.” Making use of psychological support and financial management tools is the key to finding a healthy balance between academics and life.
References:
[1] U.S. Census Bureau. (2005). College degree nearly doubles annual earnings. (Press Release CB05-38). Retrieved July 14, 2006 from http://www.census.gov/Press-Release/www/releases/archives/education/004214.html
[2] Lyons, A. C., & Hunt, J. L. (2003). Credit practices and financial education needs of community college students. Financial Counseling and Planning, 14(2), 63-74.
[3] Joo, S. H., Durband, D. B., & Grable, J. (2008). The academic impact of financial stress on college students. Journal of College Student Retention: Research, Theory and Practice, 10(3), 287–305. https://doi.org/10.2190/CS.10.3.c
[4] Pryor, J. H., Hurtado, S., Saenz, V. B., Korn, J. S., Santos, J. L, & Korn, W. S. (2006, December). The American freshman: National norms for fall 2006. Higher Education Research Institute Cooperative Institutional Research Project. Retrieved April 5, 2007 from http://www.gseis.ucla.edu/heri/PDFs/06CIRPFS_Norms_Narrative.pdf
[5] Farrell, E. F. (2005, February 4). More students plan to work to help pay for college. The Chronicle of Higher Education, LI(22), 1.
[6] Choy, S. P. (2003). Access & persistence: Findings from 10 years of longitudinal research on students. American Council on Education. Retrieved February 23, 2006 from http://www.acenet.edu/bookstore/pdf/2002_access&persistence.pdf
[7] Draut, T., & Silva, J. (2004, October). Generation broke: The growth of debt among young Americans. Demos. Retrieved November 28, 2006 from http://www.demos.org/pub295.cfm
[8] St. John, E. (1998). Loan debt: A new view. Black Issues in Higher Education, 15(10), 16. U.S. Census Bureau. (2005). College degree nearly doubles annual earnings. (Press Release CB05-38). Retrieved July 14, 2006 from http://www.census.gov/Press-Release/www/releases/archives/education/004214.html
[9] Burd, S. (2004). Colleges permit too many needy students to drop out, says report on graduation rates. The Chronicle of Higher Education, 50(39), A19.
[10] Henry, R. A., Weber, J. G., & Yarbrough, D. (2001). Money management practices of college students. College Student Journal, 4, 244-247. https://go.gale.com/ps/i.do?id=GALE%7CA77399632&sid=googleScholar&v=2.1&it=r&linkaccess=abs&issn=01463934&p=AONE&sw=w&userGroupName=byuprovo&aty=ip