Dave Says: Just Another Form of Debt

by | Jul. 24, 2012


Dear Dave,

My son is 22 and about to enter the Navy as an officer. He’s been offered a Career Starter Loan. His plan is to invest the money and let it grow while he’s in the service. I’m not sure this is a good idea. What do you think about it?


Dear Mary,

The Career Starter Loan is just another form of debt, so it’s something I can’t recommend. Basically, it’s the military trying to do a nice thing for its men and women. The problem is that it’s still a loan that has to be repaid. It’s not a signing bonus. In my mind, if you want to help me start my career, kick things off by giving me a job and a paycheck.

Do you know what the number-one cause of security clearance problems is in the military? It’s debt. And financial irresponsibility is the third most prevalent reason for dishonorable discharge from the armed forces. And yet, with this kind of program, they’re shoving debt into young people’s faces right off the bat.

I appreciate the fact that he’s trying to use an academic approach. I’m sure he sees a scenario where he can borrow money with low payments and a really low interest rate, invest it and make a ton of money. The problem is he’s leaving risk out of the equation. What happens if the investments don’t pan out? He could lose the money and still have to repay the loan.

Being older, and having a bit more wisdom, you and I realize things don’t always work out the way they’re planned. In other words, life happens. But don’t be too hard on him. He’s trying to use his intellect, and that’s a good thing. Still, wisdom always trumps academia. And that whisper of wisdom is telling us this situation could be a mess waiting to happen!


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