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At this point in time, I'm pretty much one house emergency away from kind of having $0. I feel like we were kind of lied to in the aspect of student loans. I completely claim all responsibility for my student loans. I'm the one that is responsible for them. I'm the one that signed on the dotted line. But I was 18 and I had no clue what true financial impact meant. For generations, mortgages and student loans have been held up as textbook examples of good debt. This borrowing promises to build wealth or increase your earning power over time. On the other side of the coin is so-called bad debt, things like auto loans or credit
card debt that don't provide a financial return over time. As the cost of buying a home and getting a degree have continued to climb, more Americans are questioning whether those good debt investments are actually paying off. Home prices are nearly 12% higher than they were five years ago, with the median sales price of over $410,000 during the second quarter of 2026. Meanwhile, college tuition has risen by an average of 5.5% a year, over the past few decades, outpacing inflation and other household expenses.
Rising costs should influence you in terms of whether you want to borrow, because obviously the more something costs, the more you're going to have to borrow to acquire it. Experts say the labels of good and bad debt can be misleading. Whether borrowing makes financial sense increasingly depends on the individual's circumstances. I don't like the word 'good debt'. A lot of people say, well, good debts okay, right? And I think the presumption should always be against borrowing.
You start from that premise. You understand debt is a financial obligation, a burden on your future. So then the question becomes, does this make financial sense for me? Is there a way that this debt will likely make me better off financially? Take mortgages, for instance. Home ownership is still one of the biggest ways Americans build wealth. Since 2021, home values have risen by an average of about 4.5% a year, and a typical Homeowner has a net worth of $430,000, 43 times higher than the net worth of the average renter. Yet an appreciating property doesn't automatically make every mortgage a good financial decision.
I do see the vision of it being good debt, if I were to actually pay the mortgage down and have more income come in. But I mean, right now, I'm not seeing it. There are risk factors outside your control, like the economy that can influence your investment. Housing experts say the days of outsized home price appreciation are behind us, and history has shown stocks outperforming real estate over a 30-year period. I do not feel as if my home is appreciating at the rate that I thought it would. Zillow only estimates my home selling for an additional like $40,000, that's a lot of money.
I don't want to downplay that amount. But I've known people who have sold their homes and made over $100k on it. 30% of homeowners either say they wouldn't buy their current home again or didn't know if they would, and 42% said they had at least one regret about their current home. Their top regrets were maintenance and other unexpected hidden costs, taking on a mortgage payment that was too high, and overpaying. When you purchase a home, everyone says that you should just expect certain things to happen. You should expect that the gutters will need repair, the dishwasher will break, the toilet will overflow, basement, flood, all these things. But you know, the repair costs of them are just so expensive, and I just have to
hold on to every penny of my cash just to be prepared for something like that to happen again. Meanwhile, the high cost of a mortgage has led some Americans to feel house rich and cash poor, meaning the payments after buying a home are such a strain that they can't afford to do much else. Ever since purchasing the home, I had to drain my savings, which is, I don't know, probably not the best decision in the first place, in order to close and to get into the house, move into it. Ever since then, anytime I've gotten a certain dollar amount in my savings, that makes me feel a little bit more comfortable, something happens.
Experts say future homeowners must consider some important factors to figure out whether a home is truly the right investment for their situation. Some key considerations when you are thinking about borrowing to buy a home. First of all, can you afford the mortgage and the other attendant costs that will go with that homeownership? Is it a good house you're buying? Has the neighborhood sustained values? What's been the trajectory of home prices in that neighborhood? Obviously, you need to get an inspection. Is the home in good repair? If it's going to need a lot of
work, that's going to add to your costs. And then finally, really, you need to make sure you're going to be there for several years, because when you take out a mortgage, there's something called closing costs. And that could add five, 7% to your cost of acquiring that house. And you want to make sure you live there long enough that you will experience that home price appreciation to cover those closing costs, and hopefully have a little money left over when you sell it. The same can be said of student loans. A college education still has the potential to significantly increase a worker's lifetime earnings. Those with a bachelor's degree are half as likely to be unemployed, compared to those who've only earned a high school
diploma. And bachelor's degree holders also make $1.2 million more over their lifetimes. Yet at the same time, nearly 60% of borrowers say they regret taking out student loans, and only 40% believe their degrees were worth the amount of debt they took on. I put, frankly, a lot of that on the federal government, the way that for years, the federal government advertised, really marketed federal debt as student aid. There are surveys that showed some freshmen and sophomore didn't even know they were borrowing money to go to school because the disclosures, these financial aid letters didn't make it clear that you had to pay this back. So the disclosures have gotten a lot better now, that's good.
The cost of getting the degree matters. Student loans accrue interest, and graduates could find themselves not earning as much as they expected when they first borrowed the money. New college graduates overestimated their starting salaries by nearly $24,000 a year. But then there also is a lot of propaganda again, which the Department of Education propagated for years about how much more money you will earn if you get a college degree. But that's heavily dependent, one, you got to graduate, you got to get that degree. You borrow and don't finish? Oh my gosh, you got debt and no degree, the worst thing. Two, what's your major?
There are some majors that provide a huge college premium, that is true, but there are others like my major, philosophy. I had to go to law school to get a decent job. They will not. My private student loan compounded interest and it started the day that I started college. So by the time I graduated in four years on time from my university, I had accrued $50,000 of interest on my private student loans. So I went from 120,000 to $170,000. I absolutely regret my student loans. I think the biggest issue was first, when I graduated, I did not really realize, you know, the monthly impact.
I graduated with a job that was paying me $40,000 a year salary, which, you know, was exciting. It was big girl money. But quickly, all, every single dollar I was making was going to my student loans. 42% of student loan borrowers say their loans have negatively impacted their ability to cover basic needs. 74% of student loan borrowers say they are somewhat or very worried about their ability to pay them back. For my husband and I personally, we sacrificed the first four years of our marriage. Like the first four years of our marriage, we did not do anything. We lived at my in-laws house for four years. We put off buying a house for four years.
We put off kind of starting a family or attempting to just enjoy being young and healthy and having a good time because the goal was pay off student loans because one day we could have children that might need student loans. And that will not happen for me. If you're thinking about going to a college and picking that college and then borrowing to go to that college, fortunately, the Department of Education has a lot of really useful information right now to help guide you about whether that's a good college, whether it's a good degree, and whether that's going to be affordable. So now you can look up colleges, you can look up the majors at those colleges, see a few years out, how much their graduates are making. So it'll give you a sense
of the strength of the what kind of income you're going to have. They will also have retention rates and graduation rates. That's really important. I have seen so many freshmen drop out or sophomores too, because college is tough right out of high school. Schools need to be committed to those students early on to make sure they're supported, to have successful experience and get to that degree, hopefully in four years. You can also, through the data that the U.S. Department of Education provides, you can see the average amount of debt that the graduates have incurred in going to that school.
Overall, experts say one way to think about debt in general, whether good or bad, is to treat it like a business decision. There are a lot of people out there, a lot of financial mavens, who will encourage you to borrow money to make money. I hear that a lot. You know you want to get rich? This is how the rich people do it. You've got to borrow money to make money. Don't buy it. Leverage is great. Borrowing money to invest in something else is great, so long as you're making more. But if you're making less, it will exaggerate your losses. So it's great when the market's going up. It's terrible when the markets are going down.
As the cost of buying a home and getting a degree continues to rise, the line between good and bad debt is becoming less clear. The better question now isn't whether a debt is good or bad, but whether the future you're borrowing for is worth the cost you're taking on today.
