This guest post is by Mr. Broke Professional: the husband in the husband/wife team behind Brokeprofessionals.com
You hear it all the time: “Student loans are good debt.” Or: “A mortgage is good debt.”
I agree that compared to certain types of debt (such as a usurious credit card debt, for example), they may be a “better” form of debt. What I do not believe in any longer is the notion of “good” debt.
When you really think about it, how could owing another person or institution money ever really be good? I know sometimes it is necessary. But even then is it truly “good?”
When I was in high school my parents always told me to get as much education as possible. “Be a doctor or a lawyer,” they would say. I grew up in a blue collar family, and neither of my parents attended college. They saw an education as a way to ensure that I would “do better” than they. I believed in this concept whole-heartedly, as it was also the major argument presented by the media and by teachers in school. It was like a variation on the classic Field of Dreams line, “If You Learn It, Money Will Come.”
What I failed to consider was how comparatively well-off my parents truly are. Sure they never went to fancy private colleges, nor do they belong to a country club or fit in with the bourgeoisie set. What they do have, which even Miffy and Biffy likely do not, is absolutely zero debt.
My parent’s have only owned one house in their lives, and it was paid off in the early 90’s. They purchase their cars in cash. They never had any student loans. They simply work hard at “average” jobs earning “average” livings. They will be able to retire when they wish. They have lived honest hard-working lives and I respect them more and more the older I get. (I am now in my late twenties).
I on the other hand, started my life out in a completely different manner. I took out six figures in student loans between college and law school. I am now in the process of buying a house despite having not paid off even a quarter of that student loan debt. My wife and I own are cars outright and have no student loan debt, but money is a constant worry, despite the fact that we are both “professionals” who earn “comparatively high” salaries.
Yet, at least 80% of the time that I try to explain this situation to someone, I will get the same response. “Oh, don’t worry. What you have is all good debt.”
The housing crises has not changed the average person’s opinion that mortgage debt is “good debt.”
The high unemployment rate, even amongst “professionals” has not changed the average person’s opinion that student loan debt is “good debt,” even though you cannot discharge it in bankruptcy.
Sometimes I feel frustrated trying to explain to anyone who will listen. “It’s not good debt! I still owe the money! They can take away my law license if I do not make my student loan payments! I could never auction my degrees for money! I can never get rid of my student loans in bankruptcy! I am just one catastrophe or firing away from being finished!” Then, I will stop, nearly exhausted from my own perceived truth in my arguments.
But all I will receive is a blank stare. And the person I am trying to explain this to will invariably look at me as though I have lost it–at least for a few moments. After they get over the initial shock of my mini “outburst” they will then always respond in just about the same way:
“But its ok, you will earn so much more over your career that it will all be worth it.” (i.e. Don’t worry–you have good debt!)
At that point I always get frustrated and stop trying to explain. And I’ll go back to my house, and cut another check to another student loan provider, hoping to make even the tiniest of dents in my massive, almost impossible to repay within the next decade debt.
And I for one do not see anything good about it.
Broke Professionals is a personal finance blog aimed at overeducated and underpaid. Join the husband/wife blogging team of Broke Professionals as they attempt to dig themselves out of a combined six figures in student loan debt while attempting to not give in to delusions that it is “good debt.”
retirebyforty> Thank you Mr. BP for sharing your story. I’m going to join the masses and disagree with your student loans view. It’s imperative to get a good education these days and if you have to go into debt so be it. The alternative is bleak. It’s much tougher to get by on an average job these days. I agree with Mr. BP on mortgage though. Buying a McMansion is a terrible investment. To me, the only good loans are student loans and mortgage for rental properties.
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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