Financial and psychological factors affecting education loan repayment (elr) in young adults aged 20 - 24 years

Abstract

This study looks at the intricate dynamics of education loan repayment (ELR) among emerging adults in India, a demographic that is more susceptible to socioemotional problems and has less financial literacy. The study examines how psychological stressors and financial capability interact to influence repayment behaviors using a mixed-methods design. One of the main findings is that high stress-to-income ratios were the best indicator of anxiety, and that repayment stress is more strongly correlated with repayment ability than loan size. Since borrowers with similar debt levels experienced varying levels of stress based solely on income differences, this supports the relative nature of financial pressure and validates the cyclical stress model proposed by Sato et al. (2020). Consistent with the existing literature on the role of financial literacy in promoting responsible behavior, a quantitative analysis of financial constraints, as defined by RBI (2020) and Bhandary et al. (2023), showed a strong positive relationship between discipline and financial literacy (r = 0.696, p < 0.01). To gauge overall financial capability, these were combined into a composite scale called Financial Acumen. Increased financial literacy does not always alleviate repayment anxiety, indicating that structural and psychological factors typically surpass the preservation benefits of knowledge. The only participants who self-rated as having the least financial awareness were those who had defaulted. The absence of gender disparities in stress or financial literacy may be a sign of greater financial equality among young Indian women. In a broader sense, this study presents ELR as a psychologically mediated process rather than just a financial obligation, necessitating comprehensive interventions that combine structural adaptability, emotional fortitude, and financial savvy. The findings have significant ramifications for practice, policy, and upcoming studies on young people's financial behavior in developing nations.