The Morality of Debt

Debt: a four letter word that many of us dread. A debt is typically something owed or due, and generally relates to money. Debt is not uncommon in the United States, with many people owing money for their homes, cars, and a variety of other lines of credit. Of particular note recently is the student loan debt “crisis”; that is, the fact that many Americans owe tens of thousands, sometimes even hundreds of thousands, of dollars to institutes of higher education.


Does debt have any moral implications? Like many other things in life, it depends on who you ask. We tend to attach morality to different kinds of debt, for example, “good debt” vs. “bad debt”. Mortgages and student loans are often seen as being good debt, while credit card debt and payday loans fall under the bad debt category. Some argue that good debt allows you to buy assets, such as a home or an education. But if student loan debt is presumably “good”, then why are we allegedly in a crisis?


Let’s first examine what money is. Money itself has no moral value. It is a tangible tool that can be utilized to obtain other things. Cash is literally paper; yet we attach meaning to this paper which gives it value. The value of the paper determines what we can utilize it for. If I have a $5 bill, I can hit up McDonald’s and get a few things off the dollar menu. What I can buy is limited to the value of the money that I have. If I have a $100 bill, the options for what I can purchase for lunch go up exponentially.


Back in the good (very) old days, we used a barter system. If Joe the farmer had an abundance of corn, he might trade some for beans harvested by farmer Lou. The swap would be mutually beneficial; each party receiving something of benefit to them that they did not previously have. Goods were bartered, as were services. Somewhere along the way, humans decided to invent money as a means to circumvent the problems that came along with bartering. Goods began to have established values and purchase prices, and the circulation of money began to expand throughout the world.


Debt came into play when someone lacked an ability to afford something that they wanted and/or needed. An individual could borrow the money, and then become indebted to the lender. The lender often charged interest as a means of making a profit on the lending. While this was good for the lender, it meant the borrower ended up having the pay more for the good than the initial purchase price was. As the oft quoted Bible phrase goes, “The borrower is slave to the lender.”


Is it perhaps this biblical accounting, of the borrower being “a slave”, that allows people to construct debt as a moral wrong? The Bible is of course the pinnacle of moral guidance for those who whole-heartedly believe in it’s words. Yet for many of us, who don’t have strong ties to religion, debt still invokes a feeling of uneasiness, of “wrongness”. While debt is very common in the United States, that doesn’t mean that it feels good to have it. Why is it that some people other bothered by debt, while others are completely unaffected by it?


Certainly many individuals pay no mind to it; debt can be a means of obtaining things that would otherwise be out of reach. If I want a $30k car, but only have $5k in my bank account, I could quite possibly head to a dealership and obtain financing for the car. If I want to attend a college that costs $30k per year, I can easily take out $120k of student loans to cover the cost, even if I have zero dollars to my name. Debt pushes the unaffordable into the realm of possibility for many of us.

When we look at our government, debt is completely normal when it comes to aiding in its functionality. Recently, President Biden signed the American Rescue Plan bill into law. This $1.9 trillion covid relief bill will cause the national debt to swell to more than $28 trillion. That’s TRILLION. With a T. TWENTY-EIGHT TRILLION DOLLARS. How is it even possible that a nation could be so deeply in debt? It certainly didn’t happen all at once. This is a cumulation of decades of spending, of offsetting public services, recessions, social security, etc. It has become accepted as the American way of doing things, so most of us don’t even bat an eye at it. And I would argue that most people don’t think about the national debt from a perspective of morality. It’s just the government doing their thing, as they always have, and us crossing our fingers hoping it doesn’t blow up in everyone’s faces.


If the government doesn’t feel the moral weight of their debt, why do so many of us feel guilty and downtrodden about our own debt? As we have previously stated, money itself has no moral value. It’s not good or bad, it’s just a transactional piece of paper. Yet it seems to hold immense power over us, because it dictates so many aspects of our lives: where we live, what we can purchase, even what types of experiences we can have. They say that money doesn’t buy happiness, and while there is truth to this, being poor can make life infinitely harder. When you don’t have to worry about where your next meal is coming from, or keeping a roof over your head, or buying your child new shoes when his get too tight, you eliminate certain stressors from your life. Not knowing if you can afford to feed your children or if you are going to end up homeless because you can’t pay your rent certainly triggers feelings of fear and uneasiness.

Debt however, in many cases, is self-inflicted. No one forces us to take out a student loan or rack up credit card debt. Of course there are times in life where this might seem like the only option, the only viable option at least. Certainly we would not deny our child life-saving medical treatment just to spare ourselves of the debt that might result from it. Most people will go to the ends of the earth to prioritize their own lives, and the lives of those closest to them. Debt in this case is a byproduct of unfortunate circumstances. This is in stark contrast to an individual who “needs” a Mercedes when their bank account is screaming “Hooptie!”

I don’t believe the morality lies in the debt itself, but rather one’s relationship to the debt. While it might not always be wise to take out debt, that doesn’t necessitate it being morally wrong. In what instances might I consider it a moral wrong? If an individual knowingly takes on debt with no intention of paying it back. The wrongness here lies in the deceitfulness of making a promise of repayment, and the fact that it is theft. If I borrow ten thousand dollars from you, promise to pay you back over the next two years, then take the money, skip town, and never give you back a dime, then that is wrong. I effectively stole ten thousand dollars from you. In this case, it wasn’t the debt that was wrong. It was me; my actions were morally wrong.


Conversely, sometimes it’s the lender who commits the moral wrong. A prime example of this would be loansharks, or payday lenders who charge exorbitant interest rates knowing that the individual pursuing the debt will be unable to pay it off. These individuals are often desperate, willing to take a hit on the absurdly high fees because their situation is dire enough to warrant the “service” that the lender can provide. Perhaps they are facing eviction, or have nothing to feed their family; the need for money is imminent and pressing. The lender, whether he be driven by greed, malice, or even indifference, proposes a deal that only he truly benefits from. In these instances, it becomes quite clear to me that a moral wrong has occurred. Taking advantage of someone in a heightened state of desperation, knowing that it will cause them future harm, for one’s own financial benefit, is nothing short of cruel.


So is having debt morally wrong? I would argue that no, having debt in and of itself is not morally wrong, yet it can certainly have moral implications. The moral significance lies in the relationship to the debt, and our treatment of that debt. On a personal level, those of us who carry debt might feel burdened and overwhelmed by it. We might aspire to have it gone, and work diligently towards eliminating it. Conversely, we might bury our heads in the sand and pretend it doesn’t exist. This latter approach of denial will not serve you, no matter how insurmountable the mountain may seem. Remind yourself that having debt is not a moral failing, and do your best to tackle it head on.

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