Hoyes warns that there is risk in taking to heart the notion that some types of debt are "good" — it can lead to irresponsible borrowing.
"If you believe a mortgage is good debt, you might spend as much as you can on a house," he said in an interview with HuffPost Canada.
Could that be part of the reason why Canadians have been willing to take on so much mortgage debt? With around $1.67 in debt for every dollar of disposable income, households here are the most indebted of any G7 country. And the Bank of Canada has been raising the alarm about the growing ranks of "highly indebted" consumers — those whose debt exceeds their annual income by more than 450 per cent.
"Households carrying high levels of debt could find it more difficult to adjust to a loss in income or other financial shock," the bank warned in December. "They may be forced to sharply cut back on their spending and, in severe cases, may default on loans. The consequences for the economy and the financial system could be significant."
So there you have it: you could even harm the economy taking on too much "good debt."
Determining the "right" amount of debt
But how do you know when if your "good" debt is actually bad?
"When it edges into your lifestyle, you have too much debt," says Avraham Byers, a personal finance trainer and blogger.
His definition of good debt is different from the traditional model. For him, it's "a balance you can comfortably pay every month, at a reasonable rate."
He says there are many "grey areas" when it comes to debt. For instance, a car loan may be considered bad debt because vehicles depreciate in value (often losing a quarter to a third the moment you drive it off the lot), but what if a car is your only option for getting to work, and you don't have enough to buy in cash? Then, suddenly, an auto loan can look like good debt.
Or borrowing money for home renovations. Many argue it's good debt because it increases the value of your home.
"I don't know if that's true, especially if you plan to continue living there in the future," says Byers.
He suggests a rule of thumb for debt: Your monthly payments should be no more than 25 per cent of your monthly income before taxes.
"When it edges into your lifestyle, you have too much debt."Avraham Byers, personal finance trainer
Banks are often willing to lend you up to 36 per cent of your income, but he suggests not leaving it to them to decide.
"Banks might think you can handle it but it might not be true," Byers says. "You've got to be realistic with what you can afford."
For her part, Spitz says her experience with student debt will make her more cautious taking on debt in the future.
"I'm definitely more apprehensive than I would have been," she said. "It's one thing to think about being in debt in the abstract, and a very different thing to experience it."
— With additional reporting by Jessica Chin
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