Tuesday, February 28, 2006

But It's "Good" Debt, Right?

In something of a reference to the video of Jean Chatzky I mentioned here, I found this today:

Bankrate: "Students Destined to Go Deeper in Debt"

In my view, student loan debt is rarely "good" debt. It can be "better than bad" debt, but even that is not a given. It's what the student does with the product which the debt financed (the education, hopefully) that matters.


— Posted by Michael @ 3:35 PM


I completely agree with you. I read your previous post and thought to myself "How good can that debt be?". Sometimes I wonder if these talking heads are all part of the "master plan" to get everyone farther in to debt. Okay, I'll stop with the conspiracy theories now.

The ONLY debt I would consider to be "not that bad debt" would be a mortgage or investment where you are using that money to generate a higher return than you are paying on it. (For most people, just a mortgage and that isn't even guaranteed)


Not sure I agree. I was making $22K before my masters degree, went $30K into debt to pay for it, got a new job paying $40K and now make $85K 7 years later. It never would have happened without going back to school. The loan has been paid in full for a couple of years.


I just watched the clip. I agree that there is good debt and bad debt. However, I think it is stupid to go $150,000 into debt to become a teacher! Seems to me that they should have done a little more planning.

Oh, and that look on the guy's wife's face while Jean was talking was priceless.





Yours is a case where the student-loan debt was as close to "good" debt as it can get.

The videoed couple who borrowed $150k to become a teacher and a social worker (I think) respectively? Now there is just no way I could call that "good" debt.

Where's the return on that $150k? Thanks to career choices, they're probably mired in it for decades.


The real issue is the credit card offers that students are constantly bombarded with while they are in school. Combining $10,000 in high interest credit car debt with $40,000 in low interest student loan debt is a recipe for post-grad financial disaster.

Australia has a good idea to put warning labels on credit cards. Maybe it would help students stay out of debt trouble.

Anonymous Anonymous
, at 12:49 PM, March 01, 2006  

On the local morning radio show, they asked listeners to call in and state how much their college tuition cost them for 4 years, what their degree was and what their current employment was. They were shocked to find how much money people spent in college and how they ended up working for sanitation, transportation (as bus drviers) and other jobs that had nothing to do with their degrees. Why? This was the question that was repeatedly asked. They couldn't obtain employment in their field, even with a degree.
Scary, isn't it?


I work at a private, fairly expensive university. Not nearly as expensive as someplace like Baylor, but certainly more expensive than Texas Tech.

I, too, wonder how somebody can go so far in debt to become a social worker. I also agree with you up to a point. It might be that a particular school is affiliated with your religion or that this other school has a top researcher in your chosen field or an exceptional rate of acceptance into medical or graduate school. There can be networking considerations. Some issues are more easily calculated on a spreadsheet than others. The important thing is that the kids and parents sit down and carefully think through these things.

Probably the best thing that many parents could do would be to admit that junior is not yet mature enough to be off at BigTime U and make him live at home and hit the juco (and/or work) for a year or two. It would save them paying several shekels for a bunch of Fs.

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