Is All Debt a Bad Thing?

Sarinah Aman, Northside College Prep, Junior, Fall 2025

“The average American adult owes more than $105,000”  (Horymski, 2025). To most people, this statistic sounds horrifying. While many people think of all debt as bad, this is not actually the case. Some debt, like high-interest credit card loans, can trap people in a cycle of financial stress, but other forms of debt, like mortgages and business loans, can be an investment for the future. Understanding the differences between good debt and bad debt can pave the way for building a smart financial future and a lifetime of stress-free finances. 

As Christos Politis, senior wealth manager at J.P Morgan, explains, “All debt is not bad. Taking out a mortgage, rental property, or taking loans for a business are all examples of good debt.” Debts that have the potential to increase one's wealth are “good” debt to have. Some characteristics of this are low interest rates, tax advantages, potential gain, and appreciating value.  For example, taking out business loans can be risky, but has the potential to pay off in the long run. 

“Bad” debt is any debt that can tarnish your financial stability. Some characteristics of “bad” debt are high interest rates, depreciating assets, and no returns on investment. Some examples of this are unpaid credit card debt, payday loans, and buy now, pay later (BNPL) loans. These put people in debt for years to come and can be a hard cycle to break out of. 

The best way to curb being in bad debt is to make a budget and stick to it. This does not mean never spending money on "unnecessary" items, but keeping a general plan with a financial goal that balances your income and expenses to ensure financial stability. It is also important to consider the long-term and short-term impacts of borrowing money. 

The number one priority is to make financial decisions specifically for you. “Nearly three-quarters of Americans (71%) have regrets about their spending” (Pisano, 2024). Rahwaa Casselle, million-dollar home-owner, says, “You also want to think about the kind of lifestyle that you want to live.” It's important to always keep that as the focus of all your financial decisions.