Financial Friction's Impact on Student Well-being

There has been an alarming rise in college students' stress and anxiety levels. In recent studies, 6 in 10 students report having experienced acute stress. 44% of students report symptoms of depression. Today, more than ever, students face challenges that can significantly impact their mental and emotional well-being.

Institutions are responding by making investments to support students, with 77% reporting their campus has increased its financial commitment to mental health services in the past year. These efforts are important. But is there more we can do to reduce the need for these services in the first place?

Anxiety and stress can have various sources, but one increasingly common culprit for students has emerged: financial friction. A recent study shows financial friction as the number one barrier to a college degree: students who are not currently enrolled in college report that financial barriers, including the cost of the program (55%), affordability due to inflation (45%), and the need to work (38%) are the reasons they are not currently enrolled.

Financial aid offices work diligently to match students with the funding they need, but unexamined processes may be causing unseen problems. By addressing institutional causes of financial stress, higher ed can more effectively support students’ well-being from enrollment to graduation.

The Effects of Financial Friction

Financial friction naturally creates more stress and anxiety. 76% of students report financial or debt-related concerns as a top cause of distress during the 2021–2022 school year. Another recent survey found that 44% of students are stressed about the amount of student loan debt they have accumulated, and 44% of students report being stressed about having enough money to complete the current semester.

Financial concerns do not stay compartmentalized to education. The Hope Center for College Community and Justice reports 3 in 5 students suffer from basic need insecurity as of 2021. How can a student succeed academically when they’re worried about paying for food and housing? The truth is they can't. A recent survey shows students who suffer from financial stress have lower grades and earn fewer credits: 34% said financial stressors had harmed their academic performance, and another 20% reported they had to reduce their course load due to these same stressors.

A college degree is most students' first sizeable financial decision. And for the roughly one-third of college students who are first-generation, they can have limited guidance or support in navigating often complex processes, making them even more vulnerable to this friction and stress.

To improve overall mental well-being and reduce the stress and anxiety that may derail student journeys, we must commit to reducing financial friction. Though the financial aid process is filled with regulations, institutions can still cut through complexity in their own processes. By charting personal paths to completion and unlocking every dollar, higher ed can reduce financial friction and stress, leading to stronger student outcomes.

Cut Through Complexity with a Process Detoxification

Over time policies, procedures, and processes take on a life of their own and expand. Shifting regulatory requirements often means additional rules get hastily added to pre-existing processes without considering items for removal. Over the years, this can result in unnecessary and redundant student tasks. Overly complex requirements can be a great source of stress, causing anxiety and uncertainty. Students who are unsure of how to proceed may ultimately disengage with the financing process.

Process detoxification can help with that. Start by identifying the processes that...

• generate the most questions
• take the longest to complete
• are most likely to go unfinished

These are the bottlenecks in the funding journey where you lose the most students and create the greatest friction. As you look at each step in the process, ask, "Why do we do this?" If the answer is "we don't know," or "that is how we have always done it," dig deeper. Follow up as a group and ask what happens if we stop doing this.

Process detoxification figures out how to simplify while remaining compliant. Reducing the complexity of the financial aid process will ensure that more students progress through it faster than ever before, alleviating financial stress.

From Funding Mystery to Transparency

Students attempting to navigate the financial aid process may feel like they're moving forward with the wrong glasses' prescription. They see vague outlines of what needs to happen and where to go, but they do not know the safest path forward. They are experiencing increased anxiety and stress because they have limited time and are trying to navigate the largest purchase of their life. It often only takes one tiny bump to knock students stressed even further off track.

Communication about financial aid can be challenging. Aid officers who are trying to be thorough when helping students may end up overwhelming them with details. Staff can more effectively inform and empower by communicating bite-sized pieces of information with students just in time for their use.

Use data about the student journey and your processes to outline clear next steps in the current process and how students need to complete them. When sharing this information, ensure you have removed jargon and "edu-babble" from your messaging. These words are intimidating to students and lead to elevated stress and financial friction.

Simpler, Clearer Paths Forward

Higher education has a responsibility to acknowledge and tackle the rising levels of stress and anxiety experienced by college students. The data is clear: Financial friction and complexity surrounding the funding process significantly contribute to this growing concern. To alleviate this burden and improve students' overall mental well-being, we must take proactive measures to reduce financial stress and create a more transparent and supportive environment.

By prioritizing the reduction of financial friction and working collaboratively, we can significantly reduce stress and anxiety in students, improving mental well-being and empowering stronger outcomes. Institutions can and should create environments in which students can focus on their academic pursuits without the overwhelming burden of financial stress. By championing a culture of compassion, empathy, and support, we can help ensure every student has the opportunity to thrive and succeed.