Debt Does Not Have to be a Bad Thing

Marshall Rathmell |

Did you know the total personal debt in the United States is about $14.96 trillion? That is a lot of money! About $1.57 trillion of that number consists of student loan debt. The purpose of student loans is to provide financial aid by covering your education expenses such as college tuition. The cost of college tuition increases annually, leading students to be in a large amount of debt that is challenging to pay off. According to Forbes, 43 million borrowers in the United States owe student loan debt. Of those borrowers, the age range with the highest amount of debt is 30 to 39-year-olds, with a whopping number of $504 billion. These numbers often delay this age group and even younger adults from making life and financial decisions, such as investing in retirement, buying a home, or getting married.


What should be your first step to paying off debt you might ask? The long-term goal to achieve everything that is important to you is to increase your total net worth. This can be achieved by paying down debt or increasing your assets.  It can be tricky to decide what to focus on first when you have competing priorities.


Organizing your debts from lowest to highest priority is the best way to begin hitting the nail on the head. Your highest interest rate debts are likely your highest priorities. An interest rate below what you can reasonably expect to make with your investment portfolio is likely one you don’t want to be in a rush to pay off. In other words, waiting to pay off your low-priority debts is not a bad idea because they have lower interest rates than your higher-priority debts. If you wait to pay your high-priority debts, they will most likely accrue interest, therefore making them more difficult to maintain. After paying minimum payments on all your debts, put additional funds towards a matched portion of an employer retirement account and then towards the highest priority debts. This is assuming you have appropriate emergency funds and are paying bills that need to be paid as soon as possible, such as rent or mortgage payments.



Type of Debt



Debt with an interest rate above 6%

As much as you can afford within budget


Adding to net worth with contributions

Contribute to capture employer match


Debt below 6%

Minimum payment allowing for contributions to investments



Fortunately, federal student loan debt is considered a low-priority debt compared to loans with high-interest rates. All debt is still a priority to be paid eventually, otherwise, it could negatively affect your credit score and history. If your credit needs repairing, a few ways to fix this issue are paying the full balance each month, refinancing if possible, consolidating some of your debt, and not opening new loans or credit cards until you can afford to pay off your existing debt. It is important to pay your credit card balance in full each month, so you are not accruing interest and increasing your owed debt.


While student loans can seem stressful, and there are many in the United States who struggle paying off their student loans, debt does not have to be a bad thing. If you stay on top of it, and use the information above, it can be an advantage to you by increasing your credit score/net worth and allowing for contributions to investments!