25 years old and deep in debt

[Neil]

Do poor people really need loans they can't afford to pay back?

[DGuller]

And you've never carried any credit card debt over from one month to the next? Every single month of your life, you've paid off your credit cards? You had no student loans, either?

Occasionally I forgot to make a payment on time, but other than that, no, I've never carried a credit card balance.  That's a very, very ruinous financial habit.  I didn't have any student loans either, I had a full scholarship.

[Admiral Yi]

That's exactly it. Think of it as the "you have to have money to make money" kind of thing. If you have money, then getting a loan is easy. Those who need it most are the least likely to be able to get a loan, because they show as the highest risk.

One more way to keep poor people poor and rich people rich.

Joke?

Lending money to the rich typically doesn't make them richer and denying loans to the poor typically doesn't make them poorer.

[Neil]

Indeed.  It seems that it is actually lending money to poor people that makes them poorer.  You give them a student loan, and then they waste the money on a degree, which is totally worthless.

[DGuller]

That's exactly it. Think of it as the "you have to have money to make money" kind of thing. If you have money, then getting a loan is easy. Those who need it most are the least likely to be able to get a loan, because they show as the highest risk.

One more way to keep poor people poor and rich people rich.

Joke?

Lending money to the rich typically doesn't make them richer and denying loans to the poor typically doesn't make them poorer.

Depends on what you do with the money.  Having access to credit will definitely make you richer if you have a good investment idea (which may be as simple as buying a house to live in in some areas).

[crazy canuck]

One more way to keep poor people poor and rich people rich.

Except that both Malthus and I have gone from being poor to being fairly well off.

[Malthus]

That's exactly it. Think of it as the "you have to have money to make money" kind of thing. If you have money, then getting a loan is easy. Those who need it most are the least likely to be able to get a loan, because they show as the highest risk.

One more way to keep poor people poor and rich people rich.

Joke?

Lending money to the rich typically doesn't make them richer and denying loans to the poor typically doesn't make them poorer.

Access to available credit significantly enhances your ability to make money, and lack of access can be crippling.

To take a common example, the ability to borrow to pay for an education is a major asset.

Obviously, if you are borrowing to pay for hookers and blow, that's a different story. 

[Admiral Yi]

To take a common example, the ability to borrow to pay for an education is a major asset.

Access to credit for education is, in most developed countries, completely divorced from credit-worthiness.

[crazy canuck]

Access to available credit significantly enhances your ability to make money, and lack of access can be crippling.

To take a common example, the ability to borrow to pay for an education is a major asset.

Obviously, if you are borrowing to pay for hookers and blow, that's a different story. 

As DGuller said it depends on what the money was used for.  Two of the things you and I have in common is that we obtained our educations through, then, highly subsidized educational systems (both in terms of the cost of university educations and the student loans to pay for those costs) and we both were frugal when our incomes increased (although lately you maintain the discipline much better than I do).

In the result we both now have a standard of living which is much higher than we otherwise would have had.  But both sides of that equation are important - the money to obtain an asset and spending less than we make.

[Malthus]

To take a common example, the ability to borrow to pay for an education is a major asset.

Access to credit for education is, in most developed countries, completely divorced from credit-worthiness.

How about borrowing money to start up a business? Even buying a truck and lawnmower to do some landscaping requires cash.

[merithyn]

To take a common example, the ability to borrow to pay for an education is a major asset.

Access to credit for education is, in most developed countries, completely divorced from credit-worthiness.

Not entirely true. Your parents' ability to get a loan can affect what school you go to, or even if you can go to school. Our credit is factored in for Parent Loans, which are part of the Financial Aid Package that's developed through the FAFSA.

[Admiral Yi]

How about borrowing money to start up a business? Even buying a truck and lawnmower to do some landscaping requires cash.

Note I said typically.  Of course leverage *can* magnify wealth creation.  It can also magnify wealth destruction if your investment goes in the shitter.

[Malthus]

As DGuller said it depends on what the money was used for.  Two of the things you and I have in common is that we obtained our educations through, then, highly subsidized educational systems (both in terms of the cost of university educations and the student loans to pay for those costs) and we both were frugal when our incomes increased (although lately you maintain the discipline much better than I do).

In the result we both now have a standard of living which is much higher than we otherwise would have had.  But both sides of that equation are important - the money to obtain an asset and spending less than we make.

Certainly.

Indeed, I did one better than most people - my undergraduate education was entirely free to me, thanks to a very useful perk my dad got by being a prof at the same university I went to. 

But yeah, of course doing well financially requires that borrowing be for sensible purposes. Borrowing for pure consumption makes no financial sense whatsoever. But having access to credit to increase one's ability to earn is vital.

[crazy canuck]

But having access to credit to increase one's ability to earn is vital.

Agreed.

Btw having a university prof as a dad means you were not poor.

[merithyn]

As DGuller said it depends on what the money was used for.  Two of the things you and I have in common is that we obtained our educations through, then, highly subsidized educational systems (both in terms of the cost of university educations and the student loans to pay for those costs) and we both were frugal when our incomes increased (although lately you maintain the discipline much better than I do).

In the result we both now have a standard of living which is much higher than we otherwise would have had.  But both sides of that equation are important - the money to obtain an asset and spending less than we make.

Certainly.

Indeed, I did one better than most people - my undergraduate education was entirely free to me, thanks to a very useful perk my dad got by being a prof at the same university I went to. 

But yeah, of course doing well financially requires that borrowing be for sensible purposes. Borrowing for pure consumption makes no financial sense whatsoever. But having access to credit to increase one's ability to earn is vital.

Exactly. Well said.