This is the Ramsey Call of the Day, part of the Ramsey Network. Joining me today is Ramsey Personality, Ken Coleman. James is in Philadelphia. Hey, James, what's up?
Hey, James, how's everything going? Better than I deserve. How can I help? Good, so, Dave, I'm a current third-year protein-entric medical student.
My wife and I were currently debt-free, and we have enough money to save it, we can pay for the rest of my tuition. But now with the current politics and the environment that's going on with the student loans and what's going on with the federal government, we're now continuing to take out a loan for almost 50k student loans, and then using that money to invest, especially since there's zero interest on federal student loans, we would do that with the option to pay that right away off once interest starts to accrue, and then once student debt forgiveness is officially off the table. You think that's a smart decision in your eyes? So you're doing this in the hope that you don't have to repay it?
Not necessarily. More or less, we would invest it while there is zero percent interest accruing, but if the off chance that student debt does get forgiven, we would basically just save our back then, because we would be a little bit disappointed if student loans were forgiven when we paid out of pocket all this time. Well, a couple of breakdowns in that where you and I are not aligned and I'll walk through those with you because you called and asked us. Okay?
So the first thing is, I'm not aligned that we take out student loans with the hope that they are forgiven, because to me that's like taking money that you weren't supposed to take because you didn't need it, and it's kind of like, I don't know, that feels like stealing to me. Okay? I'll just say that loud. And the second thing is borrowing money to invest at a greater interest rate than the money is costing you, has not proven to be something we found in the data that causes people to become wealthy.
So borrowing money to invest is not the normative way. It's statistically unusual as a way to build wealth. What I mean is, when we study 10,167 millionaires, the number of millionaires that borrowed money to invest, called arbitrage or playing margin, or any time you're borrowing money to invest, you can borrow money to buy real estate. You're borrowing money to invest, hoping that the investment is going to create a greater rate of return than the money costs you when you borrow it.
The number of people that built wealth doing that was way less than 5%, meaning that 96%, 97% of the millionaires we interviewed did not use this process to become millionaires. Now, if I told you as a procedure in medical school that you had a 97% failure rate, you would avoid that procedure. Oh, yeah, definitely. Because the data tells you that the facts tell you that this methodology is not successful, but 3 or 4% of the time.
And so you would avoid that methodology. And so I'm going to tell you not to borrow money. And so what I'm saying is what sounds smart on the surface has not proven out to be the typical way people build wealth, because what you're leaving out of the equation is the risk situation. And you're adding stress, you're adding risk.
Anytime you borrow money, you add risk, the more money you borrow, the more risk you have. And that enters into the factor, it enters into relationships, it enters into mental wellness, it enters into the stress across the back of your neck. It enters into the stress around your heart. It enters into the job you take because you're in debt or not in debt.
I understand you have the money in the bank to pay it off. So your level of risk is relatively low compared to someone that's playing, you know, borrowing the money and going to Vegas and has a problem, right? I understand you're not doing that. I get that.
And so I see the logic and how you got there, but I'm just telling you the procedure that you're using is not used normatively by people who get the result that you're looking for. I would also say that the logic is based on a hope and a wish. And I think it's just simply that. When I was growing up, Dave, you remember I'm 47, so all the 40-somethings will remember this crazy giant chicken named Foghorn Leghorn.
He used to terrorize the bulldog in that cartoon, and he would put a stake on the end of a fishing pole, and he'd hold it out in front of that bulldog, and make that bulldog just chase that stake. You didn't know. You didn't know that he's been canceled. Oh, he has?
Yeah, the bulldog union. Oh, is that right? I didn't know this. I thought you were serious for a second.
I was like, did I really miss that? Because anything's possible. He just killed my metaphor. Here's the deal.
Biden and the Democrats are dangling this policy out there. Yeah. And I'm just going to tell you, this isn't a political statement. Some of you will call it that you can get over it later, but I'm telling you that they are dangling that as a possibility to garner votes.
They have been in power before. They are right now. They're not going to do it. Here's why.
They got all three. If you want to pass it all right now, it's not a password. But they never have, and they never will. Here's why.
You go do the research yourself, folks. That's big money. Sally Mae Freddie, it is big money for the federal government. It has been since they started the student loan program way back in the late 50s, early 60s, and replaced the Pell Grant.
This is a big money play for the government. They're not going to forgive student loans. Ever. And I just think that if that wasn't a potential, you know, kind of a stake out there dangling in front of people, then they wouldn't be thinking about this.
And I just got to tell you, I don't mean to be the better bad news. They're not going to do it. They've had chances before. This is not a new idea.
This is not a new concept. This is recycled political jargon. And I wouldn't trust it for a second. Well, even if they do, it's still not right to your point.
I agree with that. I agree. I'm borrowing money to the government. The government gives it all.
That's like saying I'm unemployed when I'm not, so that I get unemployment or like saying I'm broke. So I get my welfare check, even though I make a money on the table. All of those are theft. All of those are morally wrong.
And so I wouldn't do it for those reasons. But thank you for the call and appreciate the discussion. It's very, very good. I'll add one thing to this whole discussion.
It sounds like we're somehow kind of self-righteous nimms or something. But again, data. The guy who wrote Millionaire Next Door, Tom Stanley was a friend of mine before he passed away, wrote the book in 1992. He wrote a follow-up book later on Decomillionaires, people that had $10 million or more.
He studied 38 characteristics. He was a statistician. That was his background, a marketing guy. And he studied 38 characteristics of the people that became Decomillionaires.
The most correlated of the different variables, married, race, profession, whatever, character qualities. The most correlated of all the 38 and all the Decomillionaires, number one, indicator you're going to be a Decomillionaire, was outlandish, fanatical levels of integrity. You don't get that one very often. Thanks for tuning in to the Ramsey Call of the Day.
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