Upon graduation several years ago, I received my very first student loan bill. I had always known that I was in debt during school, but didn’t think much of it because student loans were the “good” kind of debt. So when I first got my bill, I diligently paid it, but didn’t think much of it. And for the first few years of my debt repayment, I did what most people do: I paid the minimum.
I barely scratched the surface on my debt by paying the minimum. But truth be told, I never even really considered paying more. I thought of my student loans as a bill, so I just paid what it told me to each month. It wasn’t until I went to graduate school and got into more debt, that I finally woke up and realized I didn’t want to be in debt forever — and if I wanted that to happen, I would have to pay much more than just the minimum to my debt each month.
I believe my initial complacency regarding debt repayment was because I totally bought into the idea of “good” debt versus “bad” debt. Because my debt was on the right side of the line, it wasn’t that big of a deal.
Typically “good” debt is referred to things that will, in theory, leverage your wealth, like education and housing. Most people know the benefits of education and homeownership and in some cases it can be a worthy cause to get into debt. On the other hand, “bad” debt comes in the form of credit card debt, or an auto loan — the former hits you with high interest and the latter has diminishing returns on its overall value.
While I understand the desire to differentiate between varying kind of debts, I think it’s important to move away from this conversation. Here’s why you should avoid the “good” debt versus “bad” debt conversation.
It’s Not Productive
Talking about “good” debt versus “bad” debt all day is unproductive. Regardless of what type of debt you have, you still owe someone money. While one type of debt might offer more returns, you still have to think seriously about how your debt will affect your future.
Every single month, I put nearly half of my paycheck towards debt. It’s painful, but a drastic, yet necessary measure for me to get out of debt as soon as possible. I wish that I wasn’t so focused on thinking that I was in “good” debt when I signed on for this loan, but instead really thought about how much income I’d be putting to debt down the line. As someone in debt, regardless of the reason, you need to think seriously about how much money you will be putting towards your debt each month and for how long. Because as long as you are in debt, part of your money belongs to someone else.
Leads to Complacency
I personally believe that the “good” debt versus “bad” debt conversation can lead to complacency — a nonchalance or disregard for paying off debt. I admitted that I had fallen prey to the same line of thinking. For the first couple of years of debt repayment I simply made the minimum payment, with little thought of how long it would take to actually pay off debt.
I also know many people who are okay with paying the minimum on their student loans — there’s not that burning fire of a desire to get out of debt. As a passionate debt fighter, I want to inspire people to get out of debt so they can live financially empowered lives.
Debt does not have to be forever. But it does take action, persistence, and patience.
Creates A Dichotomy of Good and Evil
I have to admit that I used to feel so self-righteous about my student loan debt. At least I got into the good kind of debt, I thought. I made the right decisions and patted myself on the back. I now realize how stupid this was. In our culture, we tend to demonize those who get into credit card debt and celebrate those who go to college and get into a seemingly insurmountable amount of debt.
Being in debt is hard enough and I don’t think it’s good to label it good or bad. Doing so puts you at risk for taking on more debt because “it’s the good debt”. Conversely, if you are already in “bad debt” then maybe you feel bad about your situation, and just keep racking up more debt to make yourself feel better — you become apathetic of your situation. Labels are powerful and can affect our behavior, and debt repayment is no different.
Let’s eliminate the discussion of good and bad debt and let’s strive to be debt-free regardless of our situation. As I mentioned above, any kind of debt still means you owe someone money — and as long as you owe someone money, your money is never completely yours.
Imagine what else you would do with all those funds each and every month. Start by doing the math of how much you could be saving by paying off your loans early. Get inspired to pay off debt and live life to the fullest — without the overbearing weight of debt.
Melanie Lockert is a freelance wordsmith, a passionate debt fighter, and frugal lovin’ minimalist who writes at DearDebt.com. She devotes 50% of her income to student loan debt and is often dreaming of her next adventure.