How much of your debt is good debt today?

[Matt]

I want us to consider debt and the impact of it on our overall financial position. It is my hope that everyone on this forum is working towards Financial Independence, and will get there soon.

Debt is often talked about as 'good debt' and 'bad debt' with the good typically thought of as tax advantaged or healthy leveraging. Examples of this might be student loans or mortgages. I think there are many people here in the forum that have both.

When you sign up for good debt, I think it can be a good decision - getting the home that you need with a bit of leverage is helpful, and frequently can generate a lot of wealth. Similarly with a student loan that increases future earning potential.

However, I'd like to propose that as soon as you close on your home, and as soon as you graduate college these 'good debts' become bad. They are seriously hampering your ability to break into Financial Independence and should be paid off ASAFP.

What do you think? Are good debts still good, or if not, what are you doing about them?

 

[JeffA]

I'm not certain there is good debt and bad debt. All of it needs to be managed. A 4.5% tax advantaged mortgage is worse than a 2% lifetime credit card balance transfer. Those offers are becoming harder to come by, but I still have some alive from the good old days (before 2008). You don't want to carry 10% or greater interest rate debt, but if you can get 2% or less interest rate" bad"debt in a way that allows you to generate returns greater than that (i.e. CDs that pay at a rate greater than what was borrowed) or allows you to borrow less "good debt" that debt is as good as any other. All debt can lead to getting too deep in debt, and I'd rather have tax advantaged debt at the same rate as non-tax advantaged debt but the net interest rate is the key piece to focus on.

To the larger point, all debt cannot be bad. Without it, we would be a cash based economy. As wise as it sounds to only pay cash for things, most of us would be riding on bicycles and living in tents. Debt management is the key.

 

[Haley]

With rates so low and real estate not very liquid, what is the logic behind paying down home loans early?

 

[Matt]

With rates so low and real estate not very liquid, what is the logic behind paying down home loans early?

Well... Just from a conceptual perspective- who is better off in a mortgaged property equation- when you consider who receives interest, and what happens to the equity in the property if payments are ever delinquent?

I'm not against cash flowing LLCs that are leveraged, but am less keen on personal residences.

 

[Matt]

I'm not certain there is good debt and bad debt. All of it needs to be managed. A 4.5% tax advantaged mortgage is worse than a 2% lifetime credit card balance transfer. Those offers are becoming harder to come by, but I still have some alive from the good old days (before 2008). You don't want to carry 10% or greater interest rate debt, but if you can get 2% or less interest rate" bad"debt in a way that allows you to generate returns greater than that (i.e. CDs that pay at a rate greater than what was borrowed) or allows you to borrow less "good debt" that debt is as good as any other. All debt can lead to getting too deep in debt, and I'd rather have tax advantaged debt at the same rate as non-tax advantaged debt but the net interest rate is the key piece to focus on.

To the larger point, all debt cannot be bad. Without it, we would be a cash based economy. As wise as it sounds to only pay cash for things, most of us would be riding on bicycles and living in tents. Debt management is the key.

Good points - as mentioned I like the idea of leverage to secure better than a tent- but after that I don't like the debt sitting around while our focus is elsewhere.

Debt can be used strategically- but I think the duration on mortgages and student loans can make us ignore their impact to our finances.

 

[Haley]

Well... Just from a conceptual perspective- who is better off in a mortgaged property equation- when you consider who receives interest, and what happens to the equity in the property if payments are ever delinquent?

I'm not against cash flowing LLCs that are leveraged, but am less keen on personal residences.

I guess the thing is, I would not consider someone in a position to pay down early to ever be at risk of default. If you have fully funded emergency savings and retirement accounts, those funds should carry you, if you haven't done those things, you can not afford extra payments yet.

So it really becomes a question of what keeping the money liquid is worth along with tax considerations and how assets are treated for college financial aid.

 

[Matt]

Very good points Haley - I do agree with proper controls you have great options and I agree with you, I guess the risks are lack of discipline and knowing the full picture.

The problem is noise in the Personal Finance space - one person might start out listening to your point here, set up an Emergency Fund and be covered - then read that you can use a Roth as your EF, and then plow the money in the market, and be totally screwed if an emergency hits... decisions on the mortgage must have clear parameters with things like this so people don't get confused and make the right choices.

 

[Haley]

You are right about that. I consider myself very risk tolerant, but I would never have anything but a liquid cash emergency fund. Really, the last thing you want to deal with in a true emergency is trying to get at your money.

 

[Annie H.]

I don't have time to comment on it much now but Larry Swedroe, principal in Buckingham Asset Mgt-large wealth advisor, prolific author and blogger sees mortgages as "negative bond" or negative exposure to fixed income-- this refers to your asset allocation. I.E. stock/bond/cash ratio. 60/30/10 etc. It's a very interesting concept:

http://www.investmentadvisornow.com/investing-articles/641-should-you-pay-off-the-mortgage-or-invest-the-difference-061813-.html

 

[Matt]

I don't have time to comment on it much now but Larry Swedroe, principal in Buckingham Asset Mgt-large wealth advisor, prolific author and blogger sees mortgages as "negative bond" or negative exposure to fixed income-- this refers to your asset allocation. I.E. stock/bond/cash ratio. 60/30/10 etc. It's a very interesting concept:

http://www.investmentadvisornow.com/investing-articles/641-should-you-pay-off-the-mortgage-or-invest-the-difference-061813-.html

It is somewhat straight forward.... but not as simple as this guy makes out. Here is why:

If the Duration of the Mortgage and the Fixed income are equal, then one can offset the other in theory. However, let's run that in practice:

1. 200K Mortgage with rate (after tax adjustments) 4%
2. 200K Fixed income with rate (after tax adjustments) 4%

It's a wash according to him- you could say the fixed income pays off the mortgage payments, or you could say that the principle of $200K being promised back to the lender will cover the loan on the mortgage.

However, when you factor in correlation of investments this falls apart. And here is why:

If the Fixed Income you invest in defaults, or doesn't pay a dividend then you lose up to $200K from that. But your mortgage is separate investment, so you wouldn't wash your $200K debt. You would instead have lost $200K and still owe $200K. On a smaller (and more realistic) scale it could be as simple as the Fixed Income instrument holding a dividend payment as it attempts to balance the books - you can't tell the bank that you are holding off on their monthly payment until your bond investment starts kicking off interest again, they won't accept it.

Furthermore, the problem is extrapolated as you won't have a 100% mortgaged property- it will be starting off at around 80% and equity will increase over time. Therefore using the 80% notion, on a $200K mortgage you must put a $50K down payment. You are exposed to a loss of $250K on the mortgage vs a $200 asset in the bond. So if the bond stops paying, you can lose more than equal value.

In essence there is some logic to his point, but when you move from financial theory into real life applications the theory doesn't hold up so well, in my opinion.

 

[Anh]

I currently have student loan at fixed 1.75% for 30 years, which I consider good debt because I can deduct the interest. However, my income is creeping up to the level where I might not be able to take advantage of it anymore (this year I might slightly go over it so I might have to think about what to do there near end of year to reduce the AGI). I consider this my good debt, even without the deduction since the interest is quite low.
I have a car payment at fixed 1.99% for 5 years, this is probably not so good debt, but the total loan is relatively small so I have been lazy paying it off. My 401K has been doing ways better for the past 3 years or so, so might be better off just put the money into the 401K instead?
I have also been lazy in turning my HSA into an investment (right now it's sitting and earning a measly interest). But I have no problem spending a few hours per week driving around purchasing GC's and unloading them, talk about priorities!

 

[Matt]

I currently have student loan at fixed 1.75% for 30 years, which I consider good debt because I can deduct the interest. However, my income is creeping up to the level where I might not be able to take advantage of it anymore (this year I might slightly go over it so I might have to think about what to do there near end of year to reduce the AGI). I consider this my good debt, even without the deduction since the interest is quite low.
I have a car payment at fixed 1.99% for 5 years, this is probably not so good debt, but the total loan is relatively small so I have been lazy paying it off. My 401K has been doing ways better for the past 3 years or so, so might be better off just put the money into the 401K instead?
I have also been lazy in turning my HSA into an investment (right now it's sitting and earning a measly interest). But I have no problem spending a few hours per week driving around purchasing GC's and unloading them, talk about priorities!

Both of those APRs are great. When it comes to the choice about 401k vs Debt I often don't even consider appreciation of assets within it. You are making a ton of money from just socking it away and reducing taxes today, which is worth more than the debt.

The only niggling issue comes in if you are 'happy with your good debt (or bad debt)' and happy with yout 401k performance and you get a bit lazy in terms of paying down or paying more respectively and you have unnecessary lifestyle inflation.

I'm actually not against lifestyle inflation either, as long as it is a conscious decision.

 

[Annie H.]

Furthermore, the problem is extrapolated as you won't have a 100% mortgaged property- it will be starting off at around 80% and equity will increase over time. Therefore using the 80% notion, on a $200K mortgage you must put a $50K down payment. You are exposed to a loss of $250K on the mortgage vs a $200 asset in the bond. So if the bond stops paying, you can lose more than equal value.

I'm not sure I understand your numbers. If you have a $200K mortgage requiring 20% down that would be $40K and remaining mortgage of $160K. How are you exposed to a loss of $250K?

Also, with regard to fixed income/bond (I'm far from a bond expert), I would hope that no one would be investing in a single bond at that level-- $200k. Bond mutual funds offer diversification and liquidity and there's almost no risk of the loss of total investment although single bonds in the portfolio can default. Investing in individual bonds requires the ability to scale at much higher levels- most recommendations are $400-$500K or above although you can sometimes find someone advocating at $250K.

http://www.vanguard.com/pdf/s354.pdf
http://www.vanguard.com/pdf/s354.pdf

 

[Haley]

I think the $250k comes from, the 200k mortgage. If 200k is 80% of purchase price then 100% is $250k. It keeps the math easier to work with.

I just did a quick read through of the linked page. Maybe we need an asset allocation thread? I really should know much more than I do.

 

[Matt]

I think the $250k comes from, the 200k mortgage. If 200k is 80% of purchase price then 100% is $250k. It keeps the math easier to work with.

I just did a quick read through of the linked page. Maybe we need an asset allocation thread? I really should know much more than I do.

Yes exactly, and start one up!

 

[Matt]

I'm not sure I understand your numbers. If you have a $200K mortgage requiring 20% down that would be $40K and remaining mortgage of $160K. How are you exposed to a loss of $250K?

Also, with regard to fixed income/bond (I'm far from a bond expert), I would hope that no one would be investing in a single bond at that level-- $200k. Bond mutual funds offer diversification and liquidity and there's almost no risk of the loss of total investment although single bonds in the portfolio can default. Investing in individual bonds requires the ability to scale at much higher levels- most recommendations are $400-$500K or above although you can sometimes find someone advocating at $250K.

http://www.vanguard.com/pdf/s354.pdf
http://www.vanguard.com/pdf/s354.pdf

Diversification is a great thing within the asset class - but my argument is that you cannot diversify truly in the way he is suggesting. For example, if you had say 20x $10K bonds in your diversified portfolio (or a bond fund of 1000 bonds) if the government decided to tax bond coupon payments differently it could impact the price of all bonds across the board.

If it did so, your $200K would be impacted negatively, but your mortgage debt would not - so you can't truly wash them out, though there is something to be said for the logic of the balance between the two, it is not as clear cut as this person proposes.

 

[Annie H.]

I never meant to imply it was clear cut or easy or that it wasn't controversial! Some folks don't think a house with or without a mortgage should impact asset allocation or investments in any way. Others feel if you don't count the value in effect it reduces your bond allocation. Some even feel student loan debt--or any appreciable debt-- should be factored into your AA.

 

[Annie H.]

I think the $250k comes from, the 200k mortgage. If 200k is 80% of purchase price then 100% is $250k. It keeps the math easier to work with.

Thanks. It may make the math easier to work with but I've never, ever seen it talked about this way and found it confusing.

 

[Annie H.]

Maybe we need an asset allocation thread? I really should know much more than I do.

A very common AA allocation --and perhaps, oldest and most conservative-- is your age in bonds. AA is always written equity/fixed income/other. So if you are 45 -- it could be written 45/45/10-- 45% equity, 45% fixed income, 10% cash-- or other-- commodity, specialty, REIT, LPs, etc.

 

[Matt]

A very common AA allocation --and perhaps, oldest and most conservative-- is your age in bonds. AA is always written equity/fixed income/other. So if you are 45 -- it could be written 45/45/10-- 45% equity, 45% fixed income, 10% cash-- or other-- commodity, specialty, REIT, LPs, etc.

OK - but we don't accept 'very common' here

Why is your age in bonds good? Or more importantly how do such broad 'rules of thumb' work in regard to the macro economic climate, specifically in relation to interest rates?

I am very much against concept about correlating age and asset allocations, as much as I am in star signs and girlfriends. I do think that there should be a risk assessment correlated to age, but the risk of Bonds or other assets changes in relation to the overall market.

Certainly a great subject for further debate, so I hope you will argue with me I learn more from that than anything. Thread will be coming soon, and if anyone wants to kick it off prior to me doing so I'll be happy to see it.

 

[Annie H.]

OK - but we don't accept 'very common' here

Nor should you LOL.

Why is your age in bonds good? Or more importantly how do such broad 'rules of thumb' work in regard to the macro economic climate, specifically in relation to interest rates?

If you want to start drilling down to that level it's a whole new ballgame. The average investor is not at that level.

I am very much against concept about correlating age and asset allocations, as much as I am in star signs and girlfriends. I do think that there should be a risk assessment correlated to age, but the risk of Bonds or other assets changes in relation to the overall market.

Certainly a great subject for further debate, so I hope you will argue with me I learn more from that than anything. Thread will be coming soon, and if anyone wants to kick it off prior to me doing so I'll be happy to see it.

It's common because it's the easiest and simplest for folks who don't want to go any further, they just want to figure out how to allocate their 401K or IRA or other investments and aren't interested in doing a lot of learning and/or research. (there are people like that!). I'm not sure I would compare it to astrology but it is very simplistic. I wasn't recommending it so I really can't argue for it although for the first time in my life my risk adversity and age has brought me to the exact formula. The formula is probably much more dangerous/conservative for younger folks who might end up being overweighted in bonds.

I'm sure you know and are as appalled as I am at the level of education/knowledge among "average" investors. A decade ago my ex, who worked at a major metro newspaper, was trying to get the 401K plan advisor changed. He contacted at least 50 folks at the paper and almost everyone said, "you know I really don't know enough about 401Ks to get involved." This included reporters in the business section! I think things have changed a little but always surprised.

Another easy way is a target date fund. You select the fund based on the year you plan to retire--or you can look at the asset allocations of the funds and get more-- or less-- aggressive. Target date funds used to be fairly straight forward and loosely based around the age in bonds formula but in the last couple years have gotten more aggressive and competitive and need to be watched very closely. For instance, someone planning on retiring in 2040 who thought they had a 60/40 allocation might be surprised to find the fund is 70/30.

Look forward to the thread, I'm sure you know everything I've said above. I'd like to see discussion of Monte Carlo simulation and other retirement simulators:

http://www.firecalc.com/
http://www.moneychimp.com/articles/volatility/montecarlo.htm

I'm finished with this stuff but I think it's great for forum education.

 

[freebee]

Both of those APRs are great. When it comes to the choice about 401k vs Debt I often don't even consider appreciation of assets within it. You are making a ton of money from just socking it away and reducing taxes today, which is worth more than the debt.

The only niggling issue comes in if you are 'happy with your good debt (or bad debt)' and happy with yout 401k performance and you get a bit lazy in terms of paying down or paying more respectively and you have unnecessary lifestyle inflation.

I'm actually not against lifestyle inflation either, as long as it is a conscious decision.

I dont advise doing this in general, but during the housing collapse, I got a loan from my 401K and bought a foreclosed investiment house. So far, I think it was a good use of debt and leveraging assets. But, too much leveraging could be dangerous. if you are not careful and disciplined. Most advisors would discourage against touching 401K funds, but in my view, a rental property is just another form of retirement fund. The question is which retirement fund pays a better return, and the abitility/ luck to strike when the opportunity arises. Again, its not for everyone, and certainly not when the housing market is doing well.

 

[dzcinci]

I have carried both types of debt. Starting out when I got my first 'real' job I always felt if I could generate higher returns in the market, I should enjoy the loan and reap the differential. Note: this was before I thought about risk adjusted return. ~ 15 years ago purchased a vehicle with 0% interest (but in lieu of $XXXX rebate), so in reality was about a 3% loan. And have a mortgage most recently refinanced at 15 years 2.75%. I have migrated my approach over the years and now despite the low rate, I am interested in paying it down as the return on each principle payment is guaranteed. While I have always had the cash flow and emergency fund to cover required debt payments for an extended period of time, there is some intangible 'comfort' in not having to write a check (or BB bill pay) each month. Am I maximizing my investment capability? No. But, I also can achieve my goals while simultaneously adopting a lower risk profile. I am not sure of the right answer. As I council my adult children, I find I am steering them towards minimizing debt so they have maximum cash flow to utilize as desired (and not have 30-50% already spoken for each month).

 

[cocobird]

I am in the camp that the intangibles are not considered by many people. I chose to pay off my mortgage and my rental mortgage. Yes, this might cost me much in terms of investment opportunities and tax write-offs. On the other hand, I am in early retirement because I have so little debt, good or bad. Everyone's situation is different and what works for me won't work for some people.

I pay cash for my vehicles. This ensures that I buy a car that fits within my budget. No I don't have all the fancy stuff, but then I owe no one and never have to worry about making a payment. The car is good enough, better than basic, and gets me where I want to go. My expectations have been met (yippee a new car), but did not impact my life, financial or otherwise.

Regarding the rental, when you have a situation where you lose your renter, you also don't have to worry about payments. You have the time to you find the right renter. I also had the time to improve the rental so that I was able to increase the rent by 25 percent while waiting for a qualified renter.

Yes, I have used debt judiciously to get to a financial goal. I have even used so called "bad" debt for a short-term stock flip. Could that have hurt me, absolutely, but I had a high level of comfort with my financial analysis and was waiting for a CD to mature in two weeks that would repay the short-term bad debt (i.e. didn't pay my credit card off for once in my life). Made my my stock speculation arbitrage pay-off and then returned the funds to my cash holding for a relatively modest cost.

Lastly, one can become an expert in financial affairs. It takes lots of time and can be quite worrisome. Having done so for decades, I now find that I'd rather not spend the time and energy. While I enjoyed the stock market and financial manipulation in the beginning, it became tedious at the end. So rather than constantly manipulating my assets and debts, I find life quite pleasant doing things the easy way. For me that means virtually no debt, cash liquidity to cover emergencies, and automating investments (mutual funds, ETFs, and the like).

It's always a cost benefit analysis. Could I do better with active management - probably. But at what cost? I am the healthiest and happiest I have ever been. How do you weight that against the extra amount you might make?

 

[Annie H.]

I have migrated my approach over the years and now despite the low rate, I am interested in paying it down as the return on each principle payment is guaranteed. While I have always had the cash flow and emergency fund to cover required debt payments for an extended period of time, there is some intangible 'comfort' in not having to write a check (or BB bill pay) each month. Am I maximizing my investment capability? No. But, I also can achieve my goals while simultaneously adopting a lower risk profile. I am not sure of the right answer. As I council my adult children, I find I am steering them towards minimizing debt so they have maximum cash flow to utilize as desired (and not have 30-50% already spoken for each month).

You might be interested in this. Be sure to read the comments also:

http://thefinancebuff.com/having-a-mortgage-and-buying-stocks-on-margin.html

 

[blankpage]

It's always a cost benefit analysis. Could I do better with active management - probably. But at what cost? I am the healthiest and happiest I have ever been. How do you weight that against the extra amount you might make?

I am of the same camp. I have a 30yr mortgage at 3.25% that I am paying as aggressively as I can on to get it paid off in 5 years. Of course then I was dumb and was talked into a FHA loan 2 years ago when I bought the house. The PMI may only be $170/month, but that is $170 that I can't use for MS! I want to pay the mortgage off becauce the PMI that won't go away makes me angry. I know that there is no math involved with my logic, but the peace of mind makes it worth it.

 

[freebee]

I am of the same camp. I have a 30yr mortgage at 3.25% that I am paying as aggressively as I can on to get it paid off in 5 years. Of course then I was dumb and was talked into a FHA loan 2 years ago when I bought the house. The PMI may only be $170/month, but that is $170 that I can't use for MS! I want to pay the mortgage off becauce the PMI that won't go away makes me angry. I know that there is no math involved with my logic, but the peace of mind makes it worth it.

I am not sure, what exactly I did, but I did get rid of the PMI, when I brought the outstanding loan balance down to 80% of the property value. Can't remenber whether I refinanced at that time, since I refinanced a few times (those days it was possible to refinance without paying any closing cost, just a quarter percent higher interest rate to compensate for closing cost absorbtion by lender). Maybe, you can give your lender a quick call and see what they can do about PMI, now that you are under the 80% loan to value.

 

[Annie H.]

I was going to suggest the same thing. Get rid of it if you can. Don't take no for an answer. It's the law and your lender is required to give you details. You can do it by paying down the loan or by the home value. It's not easy--they love your money--and if it's an FHA loan you can't do it. Easiest way is to refi-- I don't know if there are any no fee packages around now or not. You can always go for a 15 yr and then continue to amortize over 5 years-- or any even shorter period-- just make sure no prepayment penalties.

"Request PMI cancellation---The Homeowners Protection Act gives you the right to request that your lender cancel PMI when you have reached the date when the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of your home. This date should have been given to you in writing on a PMI disclosure form when you received your mortgage. If you can't find the disclosure form, contact your lender"
http://www.consumerfinance.gov/askcfpb/202/when-can-i-remove-private-mortgage-pmi-insurance-from-my-loan.html

http://www.bankrate.com/finance/mortgages/removing-private-mortgage-insurance.aspx
http://www.bankrate.com/finance/mortgages/how-to-get-rid-of-mortgage-insurance.aspx

Good luck!

 

[Patty]

Hi, new here. I have funded bank accounts with my credit card when opening new accounts for the sign up bonus. It got me wondering when else it is possible to use a credit card to put money into a bank account? Thanks.

 

[BigCountry]

Getting rid of PMI was the best thing I ever did. We went from 30 yr to 15 yr mortgage and have never looked back.

 

[Badassity]

From a Canadian perspective (we do not get to claim mortgage interest on our principal residence but do get tax free capital gains on the sale of the house)….

We paid off our first and only mortgage in ten years. We had two five year mortgages at 5.95% and 5.4% and celebrated in 2008. Knowing what I know now, I probably wouldn't do it this way, but hindsight is awesome when it is in your favour. If we'd poured the majority of our spare cash into investments, we would have suffered a lot in the crash. As it was, we were debt free and sitting on a lot of spare cash when the markets crashed. First time I'm a victim of good timing.

If I was doing it over again, and only in today's prevailing interest rates, I'd keep a variable rate mortgage and dump my cash in investments…. prepared to redirect when rates go up. Or if I got the heebie-jeebies about the markets being at the pinnacle of collapse. And I don't even get to deduct PMI from my taxable income.

It's a not awful dilemma you have.

 

[wasabirobot]

My husband and I have 6 digit student loan debt but I still consider this good debt. The reason isn't because my education ensures my higher earnings (I work in the public sector and my earnings will never be very high) but because we are both eligible for public service student loan forgiveness. So, we pay the minimum that the government will take from us and think of it more like any other recurring bill than we think of it as debt. When ten years is up, the balances will go away.

 

[Miles Mademoiselle]

My husband and I have 6 digit student loan debt but I still consider this good debt. The reason isn't because my education ensures my higher earnings (I work in the public sector and my earnings will never be very high) but because we are both eligible for public service student loan forgiveness. So, we pay the minimum that the government will take from us and think of it more like any other recurring bill than we think of it as debt. When ten years is up, the balances will go away.

Your post made me think of this article I read: http://www.mrmoneymustache.com/2014/04/06/frugal_living_in_manhattan/. I have a hard time considering any debt "good," but can see the silver lining in your approach, if it is ultimately successful. Have you run the numbers to find out exactly how much you and your husband will have paid for your student loans? I would be curious to see how far from the actual value it is.

 

[wasabirobot]

Your post made me think of this article I read: http://www.mrmoneymustache.com/2014/04/06/frugal_living_in_manhattan/. I have a hard time considering any debt "good," but can see the silver lining in your approach, if it is ultimately successful. Have you run the numbers to find out exactly how much you and your husband will have paid for your student loans? I would be curious to see how far from the actual value it is.

Yes, I certainly have. We will pay less than the 3/4 of the principal we received (so that means no interest). There is truly no reason for us to rush to pay them off any earlier. The only thing that would change this would be a career switch out of the public sector and/or a drastic increase in income. But we won't be career-switching intentionally any time soon.

 

[Matt]

My husband and I have 6 digit student loan debt but I still consider this good debt. The reason isn't because my education ensures my higher earnings (I work in the public sector and my earnings will never be very high) but because we are both eligible for public service student loan forgiveness. So, we pay the minimum that the government will take from us and think of it more like any other recurring bill than we think of it as debt. When ten years is up, the balances will go away.

A funny thing is my kneejerk reaction to this post is that you are ripping me off personally somehow It is the action/reaction concept I think. When I see you say that you racked up 6 figure debt that the government will take from you, I think hey - I'm paying that debt! But in reality, as I think about it further it seems to be no different from any tax break, such as mortgage interest or whatever... Just trying to think about why I reacted like that, as I don't think that I am alone in that mindset.