Dave Ramsey Says ‘We Don’t Do Debt Anymore,’ but the Math Says Otherwise for Some Borrowers

"We don’t do debt anymore. All of this is going to set you up for that win, my brother." That’s Dave Ramsey, closing out a recent episode of The Ramsey Show after walking a caller through the second of his seven baby steps, lining debts up smallest to largest and throwing every extra dollar at the smallest one. The pitch is simple: borrowing is the problem, and the way out is to stop borrowing entirely.

The stakes for the average household are real. The Federal Funds target rate sits at 3.75%, down from 4.5% last September but still well above the near-zero levels of the early 2020s. Credit card APRs, mortgage rates, and auto loan rates all move with that benchmark. Meanwhile the personal savings rate has slipped to 4.0% in the first quarter of 2026, down from 5.2% a year earlier, and University of Michigan consumer sentiment just printed 49.8 in April 2026, the lowest reading in the past 12 months. People are saving less, feeling worse, and paying more to borrow.

The verdict: mostly right, with one critical exception

Ramsey is right that debt has gotten more expensive, and he’s right that most consumer debt is a wealth killer. He’s wrong to apply the same urgency to every loan on the balance sheet. The mechanic that decides whether aggressive paydown is brilliant or wasteful is the interest rate on the debt versus the after-tax return you could earn elsewhere.

Walk through it with real numbers. Take a household with $10,000 in credit card debt at a 24% APR and $400 a month to allocate. If they throw the full $400 at the card, they clear it in roughly 32 months and pay about $2,800 in interest. If instead they pay the minimum and put $300 a month into an index fund earning 8%, the card balance balloons past $14,000 within three years because the interest rate on the debt is three times the expected market return. Paying the card first wins by thousands of dollars.

Now run the same scenario with a 4% federal student loan. A $10,000 balance accrues roughly $400 in interest in year one. The same $400 a month invested at an 8% expected return earns about $200 in year one and compounds from there. Over a 10-year horizon, paying the minimum on the loan and investing the difference leaves the household several thousand dollars ahead. The borrower is renting money at 4% and earning 8% on it. That is the entire business model of every bank in America.

The variable: your highest interest rate versus 8%

Use 8% as a rough proxy for long-run equity returns before inflation, which has been running hot. Core PCE, the Fed’s preferred inflation gauge, has kept climbing through early 2026, well above the Fed’s target. Inflation cuts both ways. It erodes the real value of fixed-rate debt, but it also erodes the cash sitting in a savings account.

The rule that falls out of the math: any debt above roughly 8% should be attacked before investing beyond an employer 401(k) match. Credit cards, personal loans, payday loans, most buy-now-pay-later balances. Anything below 6%, especially a fixed-rate mortgage or subsidized student loan, is usually better serviced on schedule while excess cash goes to tax-advantaged retirement accounts. The 6% to 8% band is the genuine gray zone where personal preference and job stability matter.

One non-negotiable sits outside the math. If an employer matches 401(k) contributions, capture the full match before paying down anything except a payday loan. A 50% match is a 50% guaranteed return in year one. No credit card charges that much.

What to do this week

1. List every debt with its balance, minimum payment, and exact interest rate. Sort the list by rate, highest first. This is the avalanche method, and it minimizes total interest paid.
2. Confirm your employer 401(k) match and contribute at least enough to capture it in full. Skip this step only if you carry debt above roughly 20%.
3. Direct every dollar of extra cash flow to the top of your debt list until the rate drops below 8%. Then redirect to retirement and brokerage accounts.
4. Build a starter emergency fund of one month of expenses before aggressive paydown, and a full three to six months after the high-rate debt is gone.

Ramsey’s instinct to treat debt as the enemy is directionally correct in a 24% APR world. The interest rate on your specific loan decides whether his playbook makes you richer or leaves money on the table.