Who gets access to ‘good debt’? Experts weigh in

America’s — indeed, humanity’s — relationship with debt is a long and complicated narrative.

People have long debated what makes debt “good” or “bad”. The definition has changed over time, from ancient Greece to medieval Europe to the 20th century and into modern times.

Ancient Roman law, for example, generally considered debt negative, and debtors could be executed for failure to repay. Americans in the past could go to jail for defaulting on their debts — and some argue that debtors’ prisons remain. However, in the 1920s, industrial America began to embrace debt as a way to access new technologies such as automobiles.

While the definition – and punishment for defaulting – has changed over the years, there is one age-old unifier: Access to affordable loans that can help people build wealth has never been the same, experts say.

CNBC spoke with professionals from a variety of disciplines — philosophy, history, theology, sociology, and financial psychology — to discuss who has “good” debt, and why.

Sociologist: ‘Middle class hit hard’

Sociologists have a theory known as the “Matthew effect.” This suggests: “To those who have a lot, more is given, and to those who have little, a little is taken from them,” said Frederick Wherry, professor of sociology at Princeton University and founder of the Debt Collection Lab, a research initiative that tracks debt collection lawsuits.

That is, the rich get richer, the poor get poorer.

People who don’t need debt — they’re not in financial trouble and don’t need to borrow to survive — most have “good” debt, says Wherry, author of the forthcoming book “What We Debt: How Debt Is All About Us and How to Get Free.” such individuals – ie, rich – are also most likely to be surrounded by “good” debt: They socialize in an environment where they see others with, he said.

The opposite is also true. “If you’re desperate for debt, you might end up with bad debt,” Wherry said.

This scenario applies to “most countries,” he said. And it’s not just the poor who suffer.

Low-income Americans typically get financial aid to attend college and have more protection from debt collectors, for example, Wherry said. But the middle class is largely “on its own,” he said.

“The middle class was hit hard,” Wherry said.

Philosopher: The ‘greatest power’ of money is to pay and prevent debt

The question of debt has been at the center of philosophical thought since the ancient Greeks, said Graham Hubbs, a professor of philosophy at the University of Idaho and an expert on the philosophy of money.

These notions of debt and ethics are found in the opening pages of Plato’s “Republic.”

“At the beginning of ‘Republic,’ the character of Socrates is talking to an old rich man named Cephalus,” Hubbs said. “Socrates asked Cephalus, ‘What is so wonderful about being rich?’ … He said, ‘It takes care of my debt.’ Socrates then said, ‘Ah! What is the definition of justice: Tell the truth and pay your debts?'”

In the end, that’s not the definition — but “the starting point for thinking about justice is being trapped in debt,” Hubbs said.

“The greatest power of money is not to buy things, but to make payments and avoid debt,” he said.

The concept of “good debt” is associated with achieving happiness, Hubbs added.

People choose to consider “good debt” because they think it will improve their lives — under the assumption that their income will be enough to pay off their debt obligations down the road, Hubbs said. Conversely, bad debt is associated with stress and anxiety, he said.

“Good debt” is becoming increasingly unaffordable because housing and college payments, for example, are rising faster than expected incomes — making debt “burdensome” or causing people to ignore the debt, Hubbs said.

Historian: ‘Access to credit is really a two-tier system’

The early 1900s marked a real change in America’s attitude toward debt, said Louis Hyman, a historian of political economy at Johns Hopkins University and author of “A Nation of Debtors: An American History in Red Ink.”

In the early 20th century, US society viewed debt as quasi-immoral. “There’s actually a sense that all debt is bad — if you borrow, it means you’re wasted or broke, and that’s not a good thing,” Hyman said.

But America is rapidly urbanizing and becoming more industrialized, with more workers earning fixed salaries that make loan payments possible for a variety of expensive items, including cars and household goods, Hyman said.

“There was a broad sense in the 1920s that this was the way of the future, and in fact it was seen as broad democratic – the fact that you don’t have to save until you buy a radio, that you can only listen to the radio, and you can listen to opera, the way the rich could only hear opera before,” said Hyman.

The positive view of debt became “very broad” in the 1930s, ’40s and ’50s, as people saw mortgage debt as something to be proud of — not a sign that someone couldn’t afford a home, Hyman said.

Not everyone has equal access to credit.

The US established a “whole new credit regime” in the 1930s during the New Deal era, which was built primarily for white middle-class men, Hyman said. Others, especially Black Americans and single women, have limited or no access to the federal mortgage system and the “new world of credit that’s growing in the suburbs,” he said.

“Access to credit is really a two-tier system,” he said: one tier is “cheaper, broader. [and] more accommodating to the white middle class,” and another to those who may or may not be able to get credit at exorbitant rates.

Financial therapist: Debt anxiety may be driven by perception

Today, Sonya Lutter doesn’t hear the term “good debt” as much as in the past, she said.

“The general sense of uncertainty has people wanting to avoid debt right now,” said Lutter, director of financial health and wellness at Texas Tech University and an expert in financial psychology and financial therapy.

“So, is ‘good debt’ for the rich?” Lutter said. “Not necessarily, but anxiety takes ‘good debt’ less than options.”

That anxiety is sometimes born more of perception than reality, Lutter said. Social media makes people constantly compare themselves to others online, he said.

“What a man [financial] is the situation as bad as you think? Probably not. Do they have the potential for ‘good debt’? Perhaps. But understand, I can’t do it because it’s richer than me and they’re struggling,” Lutter said.

Theologian: ‘A lot of this is about power’

Debt has long been a part of religious history, a moral construct used to include or exclude certain people in society, said Devin Singh, professor of religion at Dartmouth College and author of the forthcoming book “Sacred Debt.”

In Roman law and early Christian thought, for example, “while ‘debt’ is used economically to describe a person who has received a loan, ‘debt’ can also be used in law to describe a person guilty of a crime or used in the Bible to describe a person guilty of a sin,” Singh said.

The church’s view of debt and debt has changed over time, he said. In the 1300s, there was a widespread belief in the church that certain types of debt were good as long as it was “productive” debt that would “bear fruit” for the church, Singh said.

However, the church’s positive view of debt is not applied equally, he said.

People who are considered to have good credit are those who believe the “right” things – while non-believers and non-Christians can be considered less trustworthy because they believe in the “wrong” doctrine, Singh said. Indeed, the language of credit is related to belief and trust: “Credit” is related to words like “credo,” which means “I believe” in Latin, Singh said.

“It’s a lot about power and perception,” he said.

This theological divide is one reason for the idea of ​​unequal access to “good debt”, he said.

“Communities have been formed because they see certain words or practices as good,” Singh said. “There’s momentum to it. Keep going.”