Monday, 1 October 2012

What is debt? What one cab driver taught me

Definition of Debt
I thought I would start this off by going to and defining the word "debt".  Here's what I found:

1. something that is owed or that one is bound to pay to or perform for another: a debt of $50.
2. a liability or obligation to pay or render something: My debt to her for advice is not to be discharged easily.
3. the condition of being under such an obligation: His gambling losses put him deeply in debt.
4. Theology . an offense requiring reparation; a sin; a trespass.
So why did I put this here?  Well, I think it shows one of the root problems of being caught in the snare of student debt which is that many do not understand that student loan debt is something that you owe and are obligated to pay back.  Now some might say that I don't know what I am talking about and that everybody knows that a student loan is debt but think about it for a moment and while you do, I'll give you an example.
What one wise cab driver taught me about debt
About 10 years ago at my previous job I met a client who had two sons.  He was from the middle east and was trained as an engineer but when he came to Canada, his credentials weren't recognized and so he ended up driving a cab and was struggling.  He said his sons are working so they can go to school and he was doing all he could to help them and trying to make money to help put them through school.  I said why don't you tell your kids to get a student loan? (Remember, I was deep in student loan debt back then.)  He looked at me with a stern and serious look and said, "How could I as a father allow my kids to take on a small mortgage?  They aren't ready for that kind of financial obligation.  As their father, I can't do that to them and I won't." 
"Wow!"  I said to myself and the reality of a student loan hit me like a ton of bricks.  At that point, I realized that I have a small mortgage to pay back and that's a big commitment that you pay because a mortgage is debt in a big way.  
Student Loans Equal Debt
 And that's the problem, you are never told what a student loan really is.  For example,  I remember guidance counsellors saying, "just get a student loan" like it's no big deal.  I remember the loan forms being passed around like candy at school.  Also, there were no classes or units that talked about student loans and the ramifications of them.  Even my parents said get a student loan.  One parent knew nothing of student loans but wanted me to do better, as she'd always struggled to keep us afloat.  And the other parent simply didn't care. He just said casually to get a student loan.  There's nothing casual about a student loan.  Unfortunately, I think a lot of us were told similar things and got duped.
So when you think of a student loan as debt - and serious debt like a mortgage - that you have to pay back your mentality changes.  If you have a mortgage, you make sure that you make the payments each and every month.   And prior to getting a mortgage you think about how you'll repay it as opposed to saying that "I'll get around to it after graduation and once I get a job."  Also, with a mortgage you realize that you owe the bank money they lent you to purchase your home and know that you have to pay them or there could be consequences.  A lot of people got student loans (me included) and treated it as "free" money and never really gave thought to the consequences of taking on a debt that equals a small mortgage.
So if you are thinking of taking a student loan in the near future, remember the cab driver and hope that you have a parent, friend, teacher or someone smart enough to recognize what a student loan truly is: debt.

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