Paying off daughters student loans

[scottmandue]

Disclaimer, if I had the money I would pay for my step daughters education, no questions asked... however:

Back-story: I'm an average middle age white collar guy pulling in around $45K a year after taxes, have a nice house, secure job, great medical benefits and a pension. Wife just moved from Oregon to Cali and is looking for work...

Her daughter just started a U of Oregon, she is a good kid, never been in trouble, straight A student and into sports. We stressed to her that we can't pay for collage outright so she needed to pursue grants and scholarships... she did but came up a few thousand dollars short so we took out student loans to cover the rest.

Long story short, wife's dad past away, her sister read the will in front of the whole family, each of the siblings get around $30K... now the daughter hearing that (I'm sure to an 18 YO is sounds like a fortune) starts hinting "so what are we going to do with the inheritance?"

Even longer story short, should we reserve the money for future use (she is in her first year at college) two, three, or six years down the road or offer to help her out now? Will keeping the loan help her build credit for when she goes out into the cold hard world?

Even more important we want her to have a sense of finical responsibility and not to get a mentality that we will always swoop in and pay off her debts.

What think ye PPOT?

[Rick Lee]

Will $30k even help her college tuition costs? Plenty of schools charge more than that for one year. So how short is she for her school's tuition? If interest on college loans doesn't start accruing until graduation, seems you'd be better off getting loans and paying them off just before the interest starts. That way you have a few years for the $30k to grow wherever you invest it, assuming you really leave it alone for that time.

[LakeCleElum]

I'd say let her get a taste of reality. Urge her to get a part time job and do loans for the rest. You can always step in later and help pay the loan. The interest rate is pretty hi.

I put myself thru college working 30 to 40 hrs a week......

[scottmandue]

Daughter did qualify for some scholarships and grants... so not sure the exact amount on the loan.

I may need to waterboard the wife to get exact numbers.

[Seahawk]

What your wife thinks is perhaps a tad more important that what the PPOT bubbas and bubettes think...it is, strictly speaking, her inheritance.

All that said.

Continue with the grants, scholarships and student loans if that is the best way for her to afford college. While my wife and I were able to save for the kids education (my son was able to earn an Army ROTC scholarship to VMI) they both have skin in the game, always have. She works during the school year and during the summer. Jack works during the summer.

I always worked in college. If you budget your time wisely, undergraduate school is easy...and I went to college in the stone tablet days. I can't even fathom how much smoother college would have been with a laptop, the internet and a printer.

[cstreit]

What better way to invest the money than in her future? I would still proceed with funding with student loans and help any gaps with the money given. My concern would be that if she knows that money is being used for her education, she might not try so hard next time when it comes time to seek financial aid. I'm sure $30k would seem like a lot to an 18 yr. old and as we know, would be gone really fast.

FWIW in general the people I know that got a full ride from Mom/Dad didn't do as well as those who really earned their education through loans/jobs/etc...

[sammyg2]

Not sure what to offer as it's your business and decision, but when faced with college costs for my daughter we decided to say no to any loans and instead pay for all costs as we go, even if it meant giving up some "discretionary extravagances". Top Raman ain't that bad once you get used to it

Our sitch is obviously different than yours so it's apples to oranges but we felt student loans were evil and should be avoided if at all possible.

If you have the $$$ to pay for the education, seems like paying off the loans would be a good thing so when she gradi-ates she can start fresh without a debt burdon.

[recycled sixtie]

This is a tough one. If your stepdaughter has been working in addition to school then paying for her tuition fees is a consideration. However if she has an attitude such that the inheritance is expected to be used for her tuition loan then I would say no.

With our daughter who now lives with her boyfriend we have paid for her tuition from day one except now she is in her Masters/Phd program, the fees are a lot less.She gets scholarship money too. My tuition fee bank has nearly run out for her. We have done everything for her when she lived in her house and she was expected to study hard and she started working at part time jobs since she was 16.

So I would take a good hard look at your daughter's attitude to money source. Again if you are expected to hand over $$$ for tuition I would say forget it. She has to learn that $$$$ have to be worked for and a loan has to be paid off by working and not handouts. I can justify my daugher receiving tuition fees from us because she has worked darn hard to get good marks plus working outside of school.

[Cannonball996]

$30k will go real fast at school, id invest that money let it start working for her, till she knows what she wants to do with her life. she can always use that money to pay off loans later.

[wdfifteen]

Sounds like it is something between the wife and her child, unless they invited you to the party. If I were you my two cents worth would be to save the $$ for retirement. There is nothing wrong with the girl paying for her own education. It will mean more to her and she will get more out of it.

[Rich76_911s]

Hmmm there are a lot of options with this one.

What types of student loans is she taking out? Certain student loans don't accrue interest while you are still in school. My feeling is that if the loans are not accruing interest while she attends school I'd take the free loan. My personal feeling is also that I'd continue to make her feel as though the student loans are going to be her responsibility. I like the idea of kids having some skin in their education. Then a wonderful graduation gift would be to pay off the loans for her.

$30K inheritance is also a great teaching tool. Teach the value of saving, show how compounding interest can grow the account, teach investment options with mixed returns and levels of risk. .. . I know none of those are easy to teach to an 18 year old that wants a new car.

Good luck,
Rich

[onewhippedpuppy]

Originally Posted by cstreit

FWIW in general the people I know that got a full ride from Mom/Dad didn't do as well as those who really earned their education through loans/jobs/etc...

Don't underestimate this element. I watched two of my wife's younger sisters screw around at college while mom and dad were paying the bills, not taking school seriously until their parents finally cut them off. It's really easy to treat college as a parent funded vacation without any skin in the game. Both were/are great kids that did well in high school, they just took advantage of the situation.

[Jim Bremner]

Honey, it's your inheritance from your father. Do with it what your pretty little heart wishes. ( say there's a NICE 1984 SC with only 35k miles on it in the classifieds...you like red don't you? )

[fintstone]

My advice would be to not even consider using the money for your daughter's college. It is Apparently she was going to go and had found ways to pay before your wife's inheritance. It is almost a year of pay for you. Help her as much as you can with current earnings (write them off on taxes), but put the inheritance into a retirement account so your daughter does not have to be responsible for you in old age (or pay down your mortgage). It will grow significantly if invested well and when you pass...she will get what is left...just as you did.

[epbrown]

Originally Posted by onewhippedpuppy

Don't underestimate this element. I watched two of my wife's younger sisters screw around at college while mom and dad were paying the bills, not taking school seriously until their parents finally cut them off. It's really easy to treat college as a parent funded vacation without any skin in the game. Both were/are great kids that did well in high school, they just took advantage of the situation.

Thirded. My brother screwed around and flunked out after his first year. In his 30s, he went back, paying his own way, and he's got 3 different Bachelors now. When it's your money, you focus.

[nota]

why go to a major high cost school for the first two years

that is what jr college is for and far far cheaper

get the AA then go to a better school for the last two years

[scottmandue]

Originally Posted by fintstone

My advice would be to not even consider using the money for your daughter's college. It is Apparently she was going to go and had found ways to pay before your wife's inheritance. It is almost a year of pay for you. Help her as much as you can with current earnings (write them off on taxes), but put the inheritance into a retirement account so your daughter does not have to be responsible for you in old age (or pay down your mortgage). It will grow significantly if invested well and when you pass...she will get what is left...just as you did.

Thank you! I guess I should have pointed out that on our limited income $30K would be a nice investment or us too.

Mind you we have only been married for three years and step daughters dad (who works at a Honda dealership as a mechanic and probably makes as much as I do) thinks for a girl to go to college is a waste and is not contributing to her education.

My wife and I feel the exact opposite, we feel an education is extremely important and thus I'm willing to help out however I don't want the daughter and/or us to go into massive debt either.

[Dueller]

One thing you will need to consider is how the inheritance will affect her qualifying for needs based grants and scholarships. $30K may knock her out of eligibility for some. Even if she blows through it for other things it can knock her out prospectively.

[LeeH]

How's your retirement savings? She can get loans for college. You can't get a loan for retirement.

[Amail]

Tell her to go with student loans. If she graduates, pay off the loans. If she doesn't, it's on her.