When students from Goldsmiths University occupied Deptford town hall in south-east London in March, many of their demands were familiar: “Fight marketisation and privatisation of higher education.” “Police not welcome on campus.” But the very first demand on their list was a new one: “Recruit more counsellors.”

The students who occupied the London School of Economics also wanted more therapy: “We demand … the removal of the standard six-session cap.” And on OccupyKCL’s list of demands, nestled between “ethical investments” and “free education”, is this one: “A permanent additional CBT [cognitive behavioural therapy] therapist.”

Ruth Caleb, who runs the counselling service at Brunel University in west London, has been listening to students’ problems for 25 years. Since 2005, the number of students seeking her help has more than doubled. When she started, the most talked about subjects were “homesickness, first boyfriends, learning to live with new people”. Now, the problems are: depression, eating disorders, self-harm. At the same time, many universities have cut back spending on counselling services for students with mental health problems.

Professionals such as Caleb have been sounding the alarm for some time. In 2011, the Royal College of Psychiatrists reported a steady increase in both the incidence and severity of mental distress among students over the previous decade. At that time, around 4% of the student population was seen by a counsellor; this year, that is closer to 8%, according to Patti Wallace, the British Association of Counselling and Psychotherapy’s lead adviser on university and college counselling.

There has also been a sharp rise in the number of students disclosing a diagnosed mental health condition: 6,055 students in 2010-11, compared with 9,610 in 2013-14 – a 58% increase in three years. Student numbers fell by 8% over the same period.

Why the rise, and why now? Partly, it’s good news. Universities have worked hard to reduce the stigma attached to mental illness, so students are more willing to ask for help. Equality legislation has also had an impact: since 2002, universities have had a legal duty of care for students with enduring mental illnesses. In response, universities employed mental health advisers, who in turn have helped students to access support, including the Disabled Student Allowance (DSA), which can be used for mentors, laptops and other support.

Less positively, private companies – for example, agencies providing mentors – have a commercial interest in increasing DSA uptake, and so, arguably, do universities: DSA is publicly funded, and students who have a mentor are less likely to use university-funded counselling services. This may have distorted the figures, encouraging students who might have sought counselling to seek a medical diagnosis instead.

“I wouldn’t say there is more mental illness, necessarily,” Caleb says. “But there is certainly more anxiety. If I had to use one word to describe how students are feeling today, I would say they are worried. And they’ve got a lot to worry about.”

The cost of a degree is now higher than ever – in England, students now graduate with an average debt of £53,000 – while its value in the job market has been eroded. In 2013, almost half of recent graduates were in non-graduate jobs, and although graduate unemployment is now falling, graduate work still tends to be precarious, part-time and low-paid.

“It is basic economics,” says Ed Pinkney, a student mental health campaigner. “Supply exceeds demand. My father is a barrister. He walked into his first job. Different days. Different times.”

So what is it that students worry about? Debt, certainly: “Not so much the fees – at least, not at first – because they’re not paid up front,” says Caleb. “The problem is living expenses. Many students have to work very long hours to survive.”

Lucy Antich, a disability officer at Goldsmiths, agrees: “Rents are astronomical – £160 a week in London – and even food security is an issue.” She sends hungry students to the chaplain, who has food vouchers, “though she often runs out”.

Students worry about the future, too. The “media hype about a ‘lost generation’” is unhelpful, says Caleb – most students will go on to lead productive lives, and worry unnecessarily. But the fear of unemployment is real, and combined with the reality of debt can lead to punitive self-expectations: one head of a university counselling service surveyed in 2013 asked: “I wonder, when did getting less than a first become a failure?”

Freya, 22, is resitting the second year of her degree. “From age 13 to 18 I was taking exams every year,” she says. “And if you want to go to uni, anything less than an A feels like failing.”

At university she couldn’t maintain the unrealistic standards she had set herself and the eating disorder she’d had as a teenager returned: “I scraped through my first year, but don’t remember it. I spent most of my time compulsively walking to burn calories.”

With the help of the university’s mental health team Freya has returned as an external student, her course adapted to avoid periods of intense pressure.

“When young people go off to uni,” she says, “their parents worry, how is she going to cook for herself? How is she going to clean? But have they ever taught this young adult how to relax, or how to cope when they get a bad grade?” Her university counselling service runs regular “perfectionism workshops”, she says, and they are always over-subscribed.

The abolition of direct public funding for higher education teaching has also led to significant demographic changes in the student population. International students, who pay higher fees, now make up 19% of the student population. For them, homesickness is likely to be more intense, family expectations can be very high, and they may be studying in a second (or third) language.

More people from disadvantaged backgrounds now attend university, too. “While this is a positive change,” says Wallace, “many are the first in their family to go to university, so their families may be less able to support them, emotionally or financially. Some struggle.”

Without proper support, such students are more likely to drop out, or take longer to complete their degrees, leaving them with even larger debts than average. As Andrew McGettigan writes in The Great University Gamble: “Sub-prime degrees, like sub-prime mortgages, are sold to communities relatively unfamiliar with the product.”

Donna, 28, is doing an MA. It took her five years to complete her BA, and she doesn’t want to think about the debt she is in. She left school with a handful of “really rubbish” GCSEs and a history of self-harm. (Later, she was diagnosed with post-traumatic stress disorder and a personality disorder.) She got into trouble with the police, and it was police officers who encouraged her to do exams in numeracy and literacy. She passed, did an access course, and received offers from all the universities she applied to. “Which was great,” she says, “until I fell back down again.”

The first in her family to go to university, and surrounded by students “who know their Ps and Qs, who have done A-levels, all that,” Donna says she had little confidence and no study skills. She was so stressed she couldn’t sleep; drugs and alcohol became a problem. In her second year, she asked for help. She was awarded DSA, which paid for a mentor, a laptop and a writing tutor to help her to structure essays.

Donna says she couldn’t have got her degree without this help, let alone progressed to an MA. “Being a student has been a struggle,” she says. “But I look at what I have achieved, and I think, with the right help, anyone can do anything.”

Research based on data from more than 5,500 students found that 81% thought counselling had helped them stay at university and 79% said it had improved their academic achievement. But supply has not kept up with demand.

A 2013 freedom of information request revealed that spending on student counselling services had been cut drastically. Meanwhile, cuts to the NHS have made referrals to specialist services more difficult, and DSA is now under threat, although cuts due this year have been postponed until 2015-16. Given the promise of continuing austerity, student services look set to be squeezed further.

This may be a false economy. Caleb has worked out that, at Brunel, the counselling service saves the university £2.5m a year in fees that would otherwise be lost.

“Do counselling services provide value for money? Emphatically, yes.” But, she adds, it’s not only about that: “It is about helping young people fulfil their potential. There are plenty of financial reasons for supporting students, but there is a moral reason, too.”

• This article was amended on 12 May 2015 to clarify that the LSE student occupation had ended.