Keeping Perspective on Good and Bad Debt
If you’re looking to learn what’s on the mind of the next generation, a university campus is a great place to start. Vanguard University president Dr. Michael J. Beals has a front row seat to the financial challenges facing students as they enter the workforce, and parents as they help their children launch. Dr. Beals shares his perspective on different attitudes toward debt and how it can shape a family’s financial future.
So much has been written about the differences between generations. It is especially interesting to me to see how families view issues of personal finance and higher education through their generational lenses.
Millennials and Generation Z are coming of age during a time of widespread social and financial uncertainty. A deep aversion to educational debt has resulted, even as more and more Americans are hamstrung by crippling retail debt.
It is important that we separate these two types of financial obligations into the concepts of good versus bad debt.
Good debt is an investment in an appreciating or revenue-generating asset, such as a home or small business. Reasonable levels of college debt (related to actual academic expenses) should be considered in this category. Good debt is an investment in the future.
Bad debt often encumbers your future in order to get something today. To the hurt of many, retail credit debt characterizes our inability to delay gratification: We want it now.
Unfortunately, investment in the future through borrowing for college has been combined with credit card and other retail debt that expresses the economic impatience of our time. We idolize Bill Gates and Mark Zuckerberg because they beat the system by quitting college and becoming billionaires. Their stories are inspiring, but the stories prompt some to pursue shortcuts to success that mask an avoidance of hard work and an aversion to educational debt.
No doubt, there’s a lot to learn from these titans of industry and tech innovators: Each took a big idea and worked hard to see it develop. Neither Zuckerberg nor Gates were trying to avoid the hard work or financial investment of college; rather, they put their time, money and talents into building their big ideas. Behind the scenes they labored, but to the world they seemed like overnight successes. Millennial and Generation Z students and their parents must realize that these highly successful business leaders became billionaires by having a big idea that computer engineers and financial wizards with college degrees made into a reality.
While the “testing ground of talent” for Zuckerbeg and Gates was in venture capital boardrooms, academic classrooms, both physical and virtual can also act as a type of personal testing ground. Here, we gain the opportunity to discover our sense of self, nurture our Spirit-empowered talents and begin the journey down God’s path for us. There will always be space for colleges and universities, because there will always be a need for professors to guide students.
Even so, many students who are prepared to work hard are delaying or dismissing college as an option to avoid any financial debt associated with their education. It is true that the cost of a college education has risen faster than the rate of inflation for decades, but annual data consistently shows that lifetime earning potential dramatically improves by earning a college degree.
For millennial and Generation Z students, this can mean setting priorities, doing the heavy lifting of preparation for life in college or elsewhere, and persevering during hard times and through hard work. For parents, this can mean preparing children for the realities of the world they’ll live in, not the one we want for them. This includes instilling resilience, when our impulse is to rescue.
I believe that a Christian liberal arts education is the premier pathway toward employability, a life well lived and resiliency. To borrow a phrase: Your academic major gets you your first job, but a liberal arts education gets you every job after that as well as the kind of life you want to lead.
Scripture is clear: God will care for us, but we have a part to play in seeing the fullness of His provision. As Christians, our calling is to cultivate wisdom, exercise courage and demonstrate faithfulness.
Maybe college isn’t for you or for your child, and success will happen by finding passions early in life, cultivating talents and doggedly pursuing unique vision. That’s great! Just don’t let shortcuts or debt aversion lure you away from the future you’re meant to live.
About the Author:
Dr. Michael J. Beals serves as president of Vanguard University, a regionally ranked, private, Christian university of liberal arts and professional studies in Costa Mesa, California. The California native came to faith in Christ at Vallejo First Assembly of God in 1977. He is an ordained minister with the Assemblies of God, spent 31 years of ministry in local churches, and has been actively involved in global outreach and development work around the world. Dr. Beals earned a Ph.D. in Christian Ethics at Fuller Theological Seminary and taught philosophy and theology at Vanguard and Fuller for many years. His publication credits include contributions to Enrichment Journal and Blackwell’s Encyclopedia of Christian Civilization. Dr. Beals and his wife Faith have been married for 38 years. They have two daughters and three grandchildren.