Thursday, April 02, 2009

Student Loan Debt -- Good or Bad?

Two recent articles in the WSJ and at a CNN blog illustrate the role of debt in modern life. In the WSJ article "With this Debt I Wed Thee" the author makes a good distinction:
Good debt: a mortgage on an affordable house; a loan on an affordable car; student loans to pay for a college degree. In effect, good debt improves your life permanently.

Bad debt: auto leases, since they generally finance cars you otherwise can't afford; home-equity loans or lines of credit, which too often fund discretionary purchases; any consumer expenses for which you allow the balance to roll over from month to month. In effect, bad debt only improves your lifestyle temporarily.
The CNN blogger is a recent grad saddled with student loan debt, over $100,000 studying an unspecified major that supposedly allowed her to obtain her position. She does mention that she knew her career prospects would yield low pay. It's clear that she and commentators on her blog are asking for a bailout. To what extent should society accommodate this behavior? The adage that student loan debt is a good one is in fact a fallacy. It's simple to weigh the costs -- does the degree allow for the income to pay off such debt? If not, then it's a no go. This stuff about a college degree creating well-rounded citizens is overrated. If you were take two groups of people send one off to college, the other to work or the military, you'd find the latter more mature and able to assume the responsibility of citizenry. College loan debt can be bad debt, as many use these loans for precisely for temporary improvement of lifestyle, i.e. postponement of adult responsibilities and hedonism with the pretensions of scholarly pursuits.

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