3 Reasons Why We Should Stop Treating Student Loans As “Good Debt”

student loans good debt

We are constantly reminded of the fact that student loan debt is good debt. I have even been told I should give thanks for having student loans in the first place!

Hah! Hahaha!

At the heart of this discussion is, “How should we educate ourselves about money?” Another blogger named Kyle recently wrote about this via an excellent guest post on what we teach our children in schools. The summary is scary: we teach students that college debt is good debt.

My take on this has been well documented. I even wrote about the silver lining to student loans and how they sparked my love of figuring out money. BUT, the topic is so near and dear to all of us, so I wanted to touch on a few more points. From having discussed this with friends and family, it appears many people share these same beliefs.

1. Financial Education Needs To Go Beyond Our Schools

Who is there to teach the teachers? I ask this question when people propose we should have personal finance 101 classes throughout every school in the world. Part of the reason people pick up on personal finance is because they have specific role models in their lives. If the teacher doesn’t fit the mold, then the student might not be engaged.

Naturally, the next place to go is into the home. Parents have an obligation to teach basic money skills to their kids, even if it is over a Sunday game of Monopoly. Each location, the school and the home, is ultimately influenced by our broader culture, which in turn influences kids. How can we shift such a large dynamic manifestation of human achievement?

I’m glad you asked! Since that leads me to the second point…

2. Our Vocabulary On Student Debt Needs An Upgrade

From the perspective of a CPA perspective, I’m willing to say some debt is better than others. What I’m not willing to say is that some debt is good and that other debt is bad.

To me, this good vs. bad debt discussion appears too narrow. Depending on the individual, the same type of debt could be good OR bad. Brushing student loan debt under the “good debt” rug is like mending a broken bone with a band-aid.

3. Our Culture Of Debt Needs To Wake Up

We live in a very materialistic world. Relative to previous generations, we have more “stuff.” Of course, some stuff is amazing. Just to name a few things we enjoy daily, transportation, medicine, and entertainment come to mind.

On the other hand, some of the stuff we buy into and that we buy is becoming a greater drag on our ability to live the life we want. For millennials graduating with a mountain of student debt, the ability to marry young, raise a family, and buy a home are basically shifted into the “I’ll do it someday soon” category. If you’re a millennial like myself with Boomer parents who are not 100% equipped for retirement, then you also have your financial plate filled.

Waking up (so to speak) is also the first phase of financial independence.

My Solution

I wish I had a clear cut, 100% effective solution to tackling this question, but I don’t.

At the heart of this debate on good vs. bad, debt is the overall discussion on how we teach personal finance to people who are not already well-versed in personal finance. Traditionally, the discussion revolves around children, but I know many adults would be happy to learn as well. Based on the amount of personal finance knowledge I picked up AFTER college, I would venture to say a lot of people would be happy to learn more.

All I know so far is that the message needs to be clear, concise, and most likely fun. Those three components appear to be the perfect triangle to get someone from novice to intermediate. I’m still stuck with questions left unanswered, such as “Who teaches the teachers?” and “What advice is needed, and what advice can wait for another day?”

Discussing money and finding ways to share important lessons are amongst the many challenges of our era. With a financially fit society, we will undoubtedly tackle the bigger issues with a clear head and the weight of debt off our shoulders.

Do you find the phrase “good debt,” to be accurate when describing student loans? How would you explain student loans to someone who’s never heard of the good debt vs. bad debt description?

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  • Kait

    “Good debt” is intended to mean that you are earning future purchasing power. For student loans, I’ve mostly heard it used to describe grad school debt for high-skilled professions, like law and medicine. The implication is that you are spending a lot of money, but expect to earn a higher wage as the result of going into debt. So a law student with debt is in a stronger position than, say, someone with a lot of credit card debt. I live in DC, where its often said that the starting salary for lawyers is $160K. If you taken out some equivalent amount of debt to pay for school, you stand a good chance of paying it off and then enjoying a career with higher earning. Law/med school debt = good debt. Credit card debt = bad debt. Additionally, if you are taking out six figures to attend an expensive undergrad institution and study something with a low expected starting salary, you are not taking on “good debt” because your earning power is not there.

  • Lauren

    Calling student loans “good debt” is basically gaslighting in my opinion. Thanks for this piece