Loans. It's a scary word. Especially to your parents. It means "going in the hole." Big-time debt.
So what's the deal with loans? Should you take one out to help pay for college? What's the Bible say? For answers we went to Tim Stebbings, professor of business at Gordon College in Wenham, Massachusetts. Along with teaching courses in business, he also offers workshops to churches, families and student groups on Christian stewardship and financial management. We believe you and your parents will appreciate Tim's thoughtful comments and insights about loans, debt and money management.
Students and their parents struggle with whether or not to take out loans to pay for college. Why is debt such a big deal?
I'm glad when Christians are cautious about taking out loans. We shouldn't take debt and overall money management lightly. God certainly doesn't. The Bible contains over 2,000 verses about money, money management and possessions.
What specifically does the Bible tell us about loans?
As an overall principle, the Bible commands us to be honest people—people of integrity. If we do not pay back a loan on time, if we don't live up to an agreement we've made with a loan company, we fail to keep a promise we've made. We're not being honest.
Some would say Scripture tells us not to take out loans. Do you think there are any verses that could be interpreted this way?
I believe some people have misinterpreted certain Scriptures, or taken them out of context. One verse, for example, is Psalm 37:21: "The wicked borrow and do not repay, but the righteous give generously." Some are tempted to put a period after "borrow." But the verse is really about the importance of repayment. It tells us that borrowing isn't wicked. What's wicked is not repaying.
Romans 13:8 is another Scripture that's sometimes used to say loans are biblically wrong. This verse says, "Owe no one anything except to love one another…" (NKJV). Some Christians interpret this verse to mean that we shouldn't incur any debt because we must "owe no one anything." I don't believe this is what the apostle Paul wanted to get across.
If you look at this verse in its context, it's really stressing the importance of loving others. Prior to this verse, the passage points out that we are to pay our taxes. I think this section of Scripture uses payment of taxes and repayment of debt to stress that we continually "owe" love to others. Yes, we should pay off our debts, but most importantly we should constantly seek to love our neighbors.
Another verse often quoted is Proverbs 22:7: "The rich rule over the poor, and the borrower is servant to the lender." The point here is that when you owe someone money, your relationship with them is affected. You're obligated to them because you owe them something. And you must understand that this is true—you are obligated to the loan company. You must do what you need to do to live up to that obligation. But I don't think you can use this verse to say that it's wrong to take out a loan.
So Scripture doesn't forbid loans?
No, I don't think so. While you must be cautious and careful, you shouldn't view loans as something that's necessarily wrong. Loans aren't inherently bad or evil. When used properly, they can be a means to achieve some very important and even godly goals. God wants us to develop our gifts and talents to their fullest so that we may serve him wherever he may lead us. And when I talk about serving God, I'm not simply talking about becoming a pastor or a missionary. God can also use Christians in law, business and medicine. The church needs people who will be salt and light in all areas of life. And to develop to your fullest, you might need a certain kind of education, which may mean taking out a loan.
If you need to take out loans to go where God calls you, then you shouldn't be afraid to do so. But be very wise and careful. Only borrow what you need to borrow. Never "over borrow." Also, know the interest rate and make sure you understand the payment schedule. You and your parents need to read all the fine print.
What you're saying is that we need to be careful how we use the money God has given us. It's a matter of good Christian stewardship, right?
That's right. It's also a matter of not letting our "wants" take over our lives. The Bible gives us many warnings against greed and covetousness. We are told over and over not to trust in money or possessions. (Editor's note: See Matthew 23:25, Romans 1:29, Ephesians 5:3, 1 Timothy 6:10.)
It's so tempting to overspend be cause we think we must have this new stereo or that new outfit. If a family turns to loans and credit buying be cause they simply can't spend money wisely, they are not practicing good stewardship. They aren't being wise with the money God has allowed them to have.
When I conduct money management workshops, I'll often use a video series called Master Your Money by Ron Blue. In the series, Ron talks about how it's easy to fake many areas of our Christian life. But he says you can't fake good stewardship. All you have to do is look at someone's checkbook. And I think he has a point. Your checkbook says an awful lot about what you value. It says a lot about how well you take care of the money God has entrusted to you.
When I counsel families on how to better manage their money, the first thing I do is look at what they consider "needs." It's tempting to view expensive homes, cars, and clothes as things we must have. But if we see them as needs, we're headed for trouble. They aren't needs. They're wants.
To afford college, a family must be willing to look at their spending habits. They need to set priorities. They need to be willing to cut out some things in order to afford others. When they've done all that, when they've willingly made some changes to simplify their lifestyle, they may discover they have more financial resources than they thought they had.
What else should families do before seeking a loan to pay for college?
Students and families need to explore all their options for finances. They need to dig deep in their search for scholarships, grants and work-study opportunities. They need to be good savers and careful spenders. Students need to help finance their education by taking on summer and part-time jobs. But with all that searching, saving and hard work, a family may still come up short. That's when it's time to consider a loan.
Let's say a family has definitely exhausted their other financial-aid options. Are there any other reasons they should still avoid a loan?
The first question to ask is this: Barring any unforeseen major expenses (like a debilitating illness or accident), will I be able to pay back this loan after graduation? Typically, the earnings from a college education will cover loan repayment. But let's say you're considering a low-paying profession. In this case, you may not be able to earn enough to pay back your loans on an agreed-upon payment schedule. Now this doesn't mean you should look for a higher paying occupation. If you feel God is calling you to this profession, you should pursue it. But that may mean working for a year before going to school. Or you may need to look for a less expensive school to attend. If you feel your future occupation won't pay you enough to repay a hefty loan, then don't take it out.
Of course, students and their parents shouldn't forget about the possibility of low-interest government loans, right?
Yes, if a family demonstrates financial need, these loans are available and affordable. You definitely need to talk to your guidance counselor or your college's financial aid officer about this possibility.
Any final comments?
I've just been wondering how I could work in that famous quote from Shakespeare's Hamlet: "Neither a borrower, nor a lender be."
So Shakespeare was against loans?
Well, a little later in this section of Hamlet, there's a passage that says, "This above all: To thine own self be true." That to me is the real message I'd like to communicate to students and their parents. If you really need a loan, don't be afraid to take one out. Just be sure you do so with honesty and integrity. And that means you're able to pay back whatever you borrow.