3 Reasons Student Loans Are Not 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!

Here’s how we in the Distilled Dollar household give thanks as we pay $1800 a month to student loans:

3 Reasons Student Loans Are Not Good Debt

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.

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. How can we shift such a large dynamic manifestation of human achievement?

I’m glad you asked! Since that leads me to the 2nd point…

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 appear 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.

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 that 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 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?


10 comments… add one
  • Financial Coach Brad Feb 8, 2017, 5:05 am

    I actually just read a post this week that stated boldly that “student debt is good debt” and not to worry about it. It’s horrible how we (well, not you and me :>) push this idea on our youth that it is okay to get yourselves into a mountain of debt before you even have a steady income. It’s a very serious problem. 🙁

  • FinanceSuperhero Feb 8, 2017, 8:29 am

    Student loans MIGHT be one of the lesser debt evils plaguing people today, but I agree with your assessment that they are definitely not good. In particular, I feel that too many students are led to believe that the pursuit of a degree with a very limited resulting job market is a worthwhile use of student loan funding. Too often the end game for many degrees involves a job completely unrelated to one’s field of study. In that case, student loan debt isn’t just bad – it’s HORRIBLE!

    • Cody @ Dollar Habits Feb 8, 2017, 1:29 pm

      I couldn’t agree more about students being misled to believe it is still a worthwhile “investment” to take out loans for a degree with very low earning potential. I’ve read in the past, you shouldn’t take out more in loans than you plan to earn your first year out of school. This still seems a little ambitious, in my opinion, but at least serves as a measure to benchmark against. $80k in loans for a degree in leisure studies might not be the best idea (no offense to anyone with a degree in leisure studies).

      To Matt’s point about financial education in the home and at school – if students were taught to look critically at the impact of student loans beyond graduation and how to do a simple cost-benefit analysis, a lot of us would be in a much better place.

  • Mrs. Picky Pincher Feb 8, 2017, 9:21 am

    I don’t really believe in “good debt,” although I know there are plenty of people who disagree (debt in rental properties, mortgages, etc.).

    I’ve heard the most boneheaded things from my fellow debtors about student loans. One person actually is just NOT paying them at all and waiting until they’re forgiven in 20 years. I … what?! I’m pretty sure their credit will be demolished in the meantime. Yikes.

    I really, really wish I’d gotten a better financial education. I wish our school actually taught it, but it was also my parents’ responsibility, too. Our culture is also to blame for encouraging debt and spending because hey, everybody has debt!

    We’re getting rid of our student loans like a bad habit. Last month we were able to pay $3,600 on them. One should be gone in May and the others by the beginning of 2018. *sigh of relief*

  • prn grind Feb 8, 2017, 10:19 am

    It’s already been defined.

    In accounting terms an expense that can provide future economic value/benefit is an asset. Liabilities are obligations that must be paid in services or in money.

    I am a nurse practitioner and if you are not familiar with the field I was a nurse before. My tuition has certainly been money well spent and definitely has proven to be an economic benefit.

    More importantly, I invested in myself. Is the suggestion in this article that I should have worked a minimum wage job until I had enough money to pay in full my tuition and mortgage in cash?

    The idea that someone is responsible (government, parents, school) for telling us how to choose or make financial decisions is simply placing the blame on someone else.

    If you went to a university or a community college your school did offer finance classes. At that time, for whatever reason you did not feel that money was important or as important as other things.

    If you went to a trade school, then no your school did not have finance classes, but a local community college did and furthermore, the internet certainly does.

    Perhaps, you felt that simple math was not your forte ( there are few calculus requirements for accounting classes) and you did not want any accounting classes to detract from your otherwise stellar GPA. Then you could have audited the classes and would have in many cases paid a lower tuition rate for auditing a class.

    It’s never too late. Audit a class NOW, go to your local community college, go online… of course, you may be busy there are time constraints and other things more important than money like professional sports and the new season of …..

    I paid my loans and realize that the profit allows an entire industry which employs a multitude of people. This industry is not the spoiled felons in professional sports or reality stars. This industry lends money to young people with no collateral to chase their dreams for a better life.

    • Vicki Feb 9, 2017, 8:48 am

      I totally agree with you. And having 3 children, all college graduates, with student loans, it was a great investment in their futures…which they are all living in at present. Gainfully employed for their perseverance, which allows them to payback those loans. Pride and integrity are well deserved virtues for living their American dreams.

  • Making Your Money Matter Feb 8, 2017, 12:04 pm

    I have similar opinions on student loan debt, as I first hand experienced what it takes not to accrue massive debt during college. I got married during my sophomore year of college (my husband was also in college) and we made it through two masters degrees with only around $7,500 in total student loans. It’s definitely possible, but it takes a lot of hard work, sacrificing fun time and weekends and a whole lot of motivation to do it. There’s a happy medium in there by doing what you can to minimize the debt, but also realizing that as long as you’re working hard and will be able to get a good job in your field a little student loan debt will be manageable. I just think that most people simply call it necessary debt and don’t think much about it until after graduation when they are buried in it.

  • Cody @ Dollar Habits Feb 8, 2017, 1:07 pm

    I definitely wish I was more objective when evaluating student loans at the time of incurring the debt. I would be in a much different position today.

    “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.”

    I came across this yesterday: https://www.aicpa.org/press/pressreleases/2015/pages/college-students-live-home-due-to-loan-debt.aspx. You will appreciate it since it is from the American Institute of CPAs. The numbers are from 2015, but I suspect they would be similar today, if not worse. The struggle is real and the unfortunate reality of the situation is the necessity to kick some of life’s most beautiful experiences like getting married, buying a home, having a baby, etc. down the road. I’m really thankful to have been able to accomplish these things while contending with student loans.

  • Millionaire By Forty Feb 9, 2017, 6:36 pm

    I wouldn’t call any debt “good” but there are certainly better debts to have than others. For example, most people view mortgages as a good debt, as in it makes more sense to invest than to pay off a low-rate mortgage early. However, my student loans are at 6.147% so it makes sense to pay it off rather than invest, especially with equities being so expensive right now. But as a general rule, debt = bad.

  • Kyle Feb 9, 2017, 9:33 pm

    Great points! When I wrote the piece you referred to I only merely scratched the surface. I could write a book on how the education system is set up for financial failure 🤔 I appreciate you tackling this tough topic! Good advice, well said.

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