A lot of the time, the debate about debt revolves around whether debt is “good” or “bad” — or whether debt is just debt, and can’t be classified in positive or negative terms. What the debate really comes down to, though, is whether or not the debt is socially acceptable.
Our Society Accepts Debt as a Part of Life
In truth, our society accepts that debt is a part of life. Most of us expect to be in debt at some point in our lives. In fact, many of expect to have debt for anywhere between 15 and 30 years due to the expectation that we will buy homes.
On top of that, as the price of an education rises, many of us expect that we will have to borrow in order to afford the cost of college. Student loans have become an acceptable part of our society. We bemoan high levels of student debt, but students don’t incur shame as a result of having education loans.
Our society even accepts car loan debt. I’m no exception. I put down a sizable down payment for my latest car purchase, but I still borrowed (at a 1.9% interest rate). So, even though a new car might not be a “need,” and it’s possible to save up for a couple years to buy one with cash, I’m probably not going to be stigmatized for financing a portion of my car’s purchase price.
So, What Makes Debt Socially Acceptable?
What makes some debt, like student loans, socially acceptable while other debt, like credit cards and payday loans, are considered shameful?
- Buy an asset: One of the biggest factors in determining whether or not debt is socially acceptable is whether or not it is used to buy an asset. A home is an asset. Our society views an education as an asset (albeit it one considered more for its future potential). Even a car, since you use it to get to work and get around, can be considered an asset in spite of its depreciating financial value.
- Planned finances vs. living beyond your means: There is an assumption that if you are resorting to credit cards to make ends meet, or if you have to turn to a payday loan, you’re mismanaging your finances. A home purchase or a car purchase, even though bought with debt, is considered a planned purchase. You have to get your finances in order to “afford” it. The use of credit cards without paying off the balance each month implies that you are wasting your money.
Of course, excessive debt, no matter what you purchase with it, is considered shameful. If you can’t make your mortgage payments, or if you taxed your finances to buy a flashy car, or if you borrow to buy an investment on margin and it turns out to have been a loser, your debt is still considered shameful. In order for debt to be socially acceptable, it needs to be used to buy things that are considered “normal,” and it needs to be “affordable.”
Readers: What do you think? What makes debt acceptable?