Say No to Career Starter Loans

Mary says her son is going into the Navy as an officer. He'll be offered a loan, and she wants to know what Dave thinks about that. Dave advises against it.

QUESTION: Mary in New York City says her son is going into the Navy as an officer. He’ll be offered a loan, and she wants to know what Dave thinks about that. Dave advises against it.

ANSWER: I don’t recommend they take them. It’s the military trying to do a nice thing for the guys, and it’s really a big signing incentive and those kinds of things. The problem is it is a loan, and it does have to be repaid. It’s not a signing bonus. If you want to start my career, start giving me a paycheck. You know what the number-one cause of problems in the military for security clearance is? Debt. And yet they start them out on this. Financial irresponsibility is the third largest reason for dishonorable discharge out of the military right now.

I don’t recommend it. I would say stay out of debt. You’re missing an opportunity for him to make a mess. I think you’re giving him great advice. Twenty-one-year olds are well-known for their investment prowess. I appreciate his academic approach to this problem, but there are life problems involved in it that our wisdom and experience tell us—this is a trap. It’s going to cause him problems later. Very seldom is this going to get spent all on investments, and if it does, the investment goes bad and he still owes the money. He thinks he can borrow the money at a low interest rate, invest it, and make a spread, but he’s leaving risk out of the equation. You and I recognize the risk called “Life Happens” in the middle of your best-laid plans of mice and men.

I would stay away from it. I appreciate how he’s approaching it with his intellect. He’s thinking through it. Those are good things, but wisdom versus academia—and wisdom always trumps academia—says that this is a mess. It’s a trap. He’s going to create a problem. Tell him to just go be a great military person, and we appreciate his service to our country, because we do.