Thesis – Financial Stress and Mental Health Among University Students

Abstract

University students in Australia experience elevated rates of psychological distress, and rising living costs have intensified concern about the financial pressures they carry. This study examined whether sleep disturbance mediates the relationship between financial stress and psychological distress among domestic and international students, drawing on conservation of resources theory. A cross-sectional survey of 600 students (378 domestic, 222 international) at an Australian university measured financial stress, sleep disturbance and psychological distress using the Kessler Psychological Distress Scale (K10). International students reported higher financial stress, poorer sleep and greater distress than domestic students. Mediation analysis indicated that financial stress was associated with distress both directly and indirectly through sleep disturbance, which accounted for approximately one third of the total effect. The findings suggest that responses to student financial hardship should address both material circumstances and their downstream effects on sleep and wellbeing. Implications for university support services, financial literacy provision and structural policy are discussed.

Introduction

The cost of studying at an Australian university now extends well beyond tuition. Successive increases in rents, food prices and utilities have compressed the budgets of students who typically combine part-time work with full-time study, and the Australian Bureau of Statistics has documented sustained growth in living costs for employee and student households over recent years (Australian Bureau of Statistics [ABS], 2023). The most comprehensive national survey of student finances found that a substantial minority of students regularly went without food or other necessities because they could not afford them, and that international students and those from low income backgrounds were most exposed (Universities Australia, 2018). Income support payments such as Youth Allowance and Austudy sit below common poverty benchmarks, and international students face additional pressures from higher fees, limits on paid work and the absence of a domestic safety net.

These material conditions matter for mental health. Psychological distress is more prevalent among tertiary students than in the general community, with Australian studies reporting rates several times higher than population norms (Stallman, 2010; Larcombe et al., 2016). Financial hardship is one of the most consistently cited correlates of that distress, yet the pathways connecting the two remain less well understood in Australian student populations. Establishing not only whether financial stress is associated with distress, but how, matters because different mechanisms imply different responses: if the association runs partly through a modifiable factor such as disturbed sleep, interventions gain more than one point of entry.

This thesis examined the relationship between financial stress and psychological distress among domestic and international students at an Australian university, and tested sleep disturbance as an explanatory mechanism. Three research questions guided the study:

1. What levels of financial stress, sleep disturbance and psychological distress do domestic and international students report, and how do these differ between the two groups?
2. Is financial stress associated with psychological distress after accounting for demographic covariates?
3. Does sleep disturbance mediate the relationship between financial stress and psychological distress?

Literature Review

Financial stress and mental health

The association between financial difficulty and poorer mental health is well established internationally. A systematic review and meta-analysis of unsecured debt found consistent relationships with depression, anxiety and general psychological distress across diverse samples (Richardson et al., 2013). Several pathways have been proposed: financial hardship generates chronic worry, constrains health promoting behaviours such as adequate nutrition and physical activity, disrupts sleep, and can carry stigma that discourages help seeking. Among students, the need to increase paid work further erodes both academic performance and rest. The direction of effects is likely to be reciprocal over time, but the proximal experience for many students is that money worries intrude on daily functioning and recovery.

Conservation of resources theory

Conservation of resources (COR) theory offers a coherent account of why financial stress erodes mental health (Hobfoll, 1989). It proposes that people strive to obtain, retain and protect valued resources, and that psychological strain arises when resources are threatened or lost. Financial hardship represents a direct and continuing loss of a fundamental resource, and it threatens others, including housing security, time and social standing. COR further predicts loss spirals, in which an initial loss depletes the reserves needed to cope, making further loss more likely and strain more severe (Hobfoll et al., 2018). Within this framework, sleep is a personal resource that restores coping capacity yet is itself vulnerable to depletion under financial threat. When money worries impair sleep, students lose a key means of replenishing the resources that financial stress is draining, providing a theoretical basis for expecting sleep disturbance to carry part of the effect of financial stress on distress.

Psychological distress among Australian students

Australian evidence indicates that distress is common and unevenly distributed across the student population. Early prevalence work reported that distress among students far exceeded general population estimates (Stallman, 2010), and later multi-campus research identified financial difficulty, along with academic and social factors, as a significant correlate of distress at an Australian university (Larcombe et al., 2016). National monitoring shows that young adults, the age group to which most students belong, report the highest rates of psychological distress of any age band (Australian Institute of Health and Welfare [AIHW], 2022). International students warrant particular attention: alongside financial exposure, they navigate visa conditions, separation from support networks and academic adjustment in an additional language, which plausibly amplifies both financial stress and its consequences. Despite this, mediating mechanisms have rarely been tested directly in Australian student samples, and the comparative position of domestic and international students is under-examined. The present study addresses that gap by modelling sleep disturbance as a mediator across both groups.

Methodology

Design and participants

A cross-sectional survey design was used. The sample comprised 600 students enrolled at a large multi-campus Australian university, recruited through unit announcements and student communication channels during one semester. Of these, 378 (63.0%) were domestic students and 222 (37.0%) were international students. The mean age was 23.0 years (SD = 4.9), 366 respondents (61.0%) identified as women, and 441 (73.5%) undertook paid employment while studying. The sample spanned undergraduate and postgraduate coursework students across the major faculties.

Measures

Psychological distress was measured with the 10-item Kessler Psychological Distress Scale (K10), which asks how often respondents experienced symptoms of distress over the previous four weeks and is scored from 10 to 50, with higher scores indicating greater distress (Kessler et al., 2002). The K10 is well suited to Australian research because it underpins national health monitoring and has validated local interpretive categories, in which scores of 30 to 50 denote very high distress (Andrews & Slade, 2001; ABS, 2023). Internal consistency in the present sample was high (Cronbach’s alpha = .90). Financial stress was assessed with a 10-item measure of difficulty meeting essential living costs such as rent, food, utilities and course materials, scored 0 to 40, with higher scores indicating greater stress (alpha = .89). Sleep disturbance was measured with a validated brief scale capturing difficulty falling asleep, staying asleep and non-restorative sleep, scored 0 to 20 (alpha = .84). Demographic items recorded age, gender, enrolment status, international status and employment.

Analytic strategy

Analyses were conducted in three stages. First, descriptive statistics and independent samples comparisons characterised the two student groups. Second, hierarchical regression tested whether financial stress predicted distress after controlling for age, gender, employment and international status. Third, a simple mediation model estimated whether sleep disturbance mediated the effect of financial stress on distress, using ordinary least squares path analysis with bias-corrected bootstrapping of 5,000 resamples to test the indirect effect (Hayes, 2018). Standardised coefficients are reported. Figure 1 presents the conceptual model, in which financial stress is the predictor, sleep disturbance the mediator and psychological distress the outcome.

Ethical considerations

The study was approved by the administering university’s Human Research Ethics Committee, and procedures complied with the National Statement on Ethical Conduct in Human Research (National Health and Medical Research Council [NHMRC], 2023). Because the survey asked about distress, a duty of care protocol was built in: participation was voluntary and anonymous, consent was informed, and every page displayed contact details for university counselling, the national youth mental health service headspace, and after-hours crisis lines, so that support was visible regardless of a student’s responses (Rickwood et al., 2014). No individual scores were returned to the university, and reporting is confined to aggregate patterns to protect participant privacy.

Results

Descriptive statistics

Table 1 reports the sample characteristics and key measures by student group. Distress was elevated across the whole sample: the mean K10 score of 23.8 falls within the high distress band of the Australian interpretive categories, and 166 students (27.7%) scored in the very high range of 30 to 50 (Andrews & Slade, 2001). International students reported higher financial stress, poorer sleep and greater distress than domestic students, and were more likely to report very high distress (35.1% compared with 23.3%) and food insecurity (39.6% compared with 27.0%). These differences are consistent with the additional pressures international students face and with national findings on student finances (Universities Australia, 2018).

Table 1: Sample characteristics and key measures by student group (N = 600)

Note. Higher scores indicate greater financial stress, poorer sleep and greater distress. K10 interpretive bands follow Andrews and Slade (2001).

Mediation analysis

Financial stress correlated with psychological distress (r = .43, p < .001) and with sleep disturbance (r = .42, p < .001), and sleep disturbance correlated with distress (r = .40, p < .001). In hierarchical regression, the demographic covariates explained 9% of the variance in distress, with international status a significant predictor; adding financial stress raised the explained variance to R² = .24, F(5, 594) = 37.5, p < .001, and financial stress remained significant with covariates retained. The mediation model is summarised in Table 2. Financial stress predicted sleep disturbance (path a, β = .42), sleep disturbance predicted distress with financial stress held constant (path b, β = .34), and the direct effect of financial stress on distress remained significant (path c’, β = .29), indicating partial mediation.

Table 2: Standardised path coefficients for the mediation model (outcome = K10 psychological distress; mediator = sleep disturbance; covariates controlled)

The indirect effect was calculated as the product of the two constituent paths:

Indirect effect = a × b = 0.42 × 0.34 = 0.14

The total effect equals the sum of the direct and indirect effects, confirming internal consistency: c = c’ + ab = 0.29 + 0.14 = 0.43. The proportion of the total effect carried by sleep disturbance is therefore:

Proportion mediated = ab / c = 0.14 / 0.43 = 0.33, or approximately 33%.

The bias-corrected bootstrap 95% confidence interval for the indirect effect, [.09, .20], did not include zero, indicating a statistically significant partial mediation. Financial stress was thus associated with distress both directly and through its effect on sleep, with sleep disturbance accounting for roughly one third of the total association.

Discussion

The results answer all three research questions. Distress was high across the sample and higher again among international students, financial stress predicted distress after demographic controls, and sleep disturbance partially mediated the relationship. Interpreted through conservation of resources theory, the pattern is coherent: financial hardship represents an ongoing resource loss that both directly strains wellbeing and undermines sleep, a resource that would otherwise help students recover, producing the kind of loss spiral the theory anticipates (Hobfoll, 1989; Hobfoll et al., 2018). That a mechanism sits between financial stress and distress matters practically, because it identifies more than one place to intervene.

The first implication concerns support services. Elevated distress, concentrated among international students, reinforces the case for accessible, culturally responsive university counselling and clear pathways into subsidised community care such as the Better Access initiative, alongside youth focused services like headspace (Rickwood et al., 2014). The regulator’s expectation that providers take reasonable steps to support student wellbeing gives institutions a clear mandate to resource these services rather than treat them as discretionary (Tertiary Education Quality and Standards Agency [TEQSA], 2020). Because sleep emerged as a mediating pathway, brief sleep focused interventions may offer an efficient, low stigma complement to counselling, addressing a proximal driver of distress that students may find easier to discuss than either money or mental illness.

The second implication concerns financial literacy and counselling. Equipping students to budget, understand their entitlements and access hardship assistance is worthwhile, but the results caution against treating it as a sufficient response. The distress documented here is a reasonable reaction to genuine material hardship, not a deficit of individual competence, and framing it primarily as a skills problem risks shifting responsibility onto students for circumstances they did not create. Financial literacy is best positioned as one element within a broader package that includes emergency relief, food assistance and financial counselling.

The third implication concerns structural drivers, which lie largely outside the university’s control. Income support settings, the cost of housing, and the vulnerabilities created by international students’ fee levels and work arrangements are the upstream determinants of the financial stress measured here (Universities Australia, 2018; ABS, 2023). Sustained improvement in student mental health is unlikely through campus services alone while these determinants remain unaddressed, and the present evidence strengthens the case for treating student poverty as a public health issue as much as an educational one (AIHW, 2022).

Several limitations qualify these conclusions. The cross-sectional design precludes causal inference; although the model is theoretically directed, reciprocal pathways in which distress worsens sleep and financial management cannot be excluded. All measures were self-reported and drawn from a single university, which limits generalisability and raises the possibility of common-method bias, and sleep was assessed by questionnaire rather than objective measurement. Finally, the mediator explains part but not most of the effect, indicating that other pathways, including food insecurity, rumination and reduced help seeking, remain to be tested. Longitudinal, multi-site designs would strengthen causal claims.

Conclusion

Financial stress is associated with meaningful psychological distress among Australian university students, and part of that association operates through disturbed sleep. Distress was high across the sample and higher among international students, who also reported greater financial stress and food insecurity. Framed by conservation of resources theory, financial hardship both directly burdens wellbeing and depletes sleep, a resource students rely on to cope, and a worked estimate attributed about a third of the total effect to this single pathway. Student financial hardship is therefore best treated as a wellbeing issue with several points of intervention rather than a purely economic inconvenience. Well resourced support services, sleep focused and financial counselling that does not individualise structural problems, and policy attention to the income, housing and visa conditions that generate financial stress together offer a more complete response than any single measure. For the students behind these figures, easing material pressure is likely to be as protective of their mental health as any clinical service.

References

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