Comments on: Ask the Piggy Bank: Reader Debt Question — College, Home Equity, or Car Loan?

By: miranda

miranda — Fri, 07 Nov 2008 22:52:19 +0000

Thank you for sharing, Laura! I agree that there are other ways to be supportive without paying for college — or all of it at any rate. And I do like the idea some have floated about a 2 year school. My husband started out at a community college to save money, and he’s been just fine.

By: Laura

Laura — Fri, 07 Nov 2008 22:25:23 +0000

Your advice on having the daughter take care of her college expenses was great. Maybe this will motivate her to continue looking for scholarships or consider a lower cost option, at least for the first two years. Student loans are not a default option.

The parents can support her without paying for college.

By: miranda

miranda — Fri, 07 Nov 2008 12:22:32 +0000

Thank for your thoughts, FixThePig! You make a good point that 8K is a good start, but that it doesn’t hurt to be prepared with more.

By: FixThePig

FixThePig — Fri, 07 Nov 2008 03:41:33 +0000

First and Foremost great job at managing your debt load. The home equity loan you are carrying is one of the last things I’d paydown, unless of course you are paying an outrageous interest rate. My guess is that you are tied to prime or libor and have a relatively low rate; furthermore the interest is more then likely tax deductible for you.
While 8k is a nice start to a nest egg, I would suggest continuing to build this up. Perhaps put the 8k in a high yielding money market savings account. I’m not sure what sector of the economy you work in; hopefully you are relatively sheltered from a potential layoff, but having a little larger cash savings account can really come in handy for a rainy day!

By: miranda

miranda — Fri, 07 Nov 2008 01:46:32 +0000

Thanks for your thoughts, Sean. I think that it is a good idea to look at cash flow, and include that into the equation.

By: Sean

Sean — Fri, 07 Nov 2008 01:27:28 +0000

I’d focus on maximizing the monthly cash flow. Starting with minimizing expenses. The situation will be different in 12 months depending on if you clear $500, $1000 or $2000+ per month. That also helps to increase the power of your emergency fund. An $8,000 e-fund with $4000 expenses = 2 months, but with $2000 expenses = 4 months. Hope that helps. Best of luck!

By: miranda

miranda — Thu, 06 Nov 2008 22:07:56 +0000

Thank you for sharing your thoughts, Kacie. You make an excellent point: It is easier for young people to borrow for school than it is for older people to get what they need close to retirement.

By: Kacie

Kacie — Thu, 06 Nov 2008 21:40:55 +0000

Though the parent’s income is good, their savings and debt don’t seem to be in a position where they should be taking on more debt for their daughter’s sake.

My parents helped me through school, though they couldn’t really afford to. Now, they have hardly anything in savings and plenty of debt. I feel terrible and so guilty.

They can’t take a loan out for retirement. I could have borrowed money for school.

By: miranda

miranda — Thu, 06 Nov 2008 21:36:53 +0000

I do agree that it is important to go with the items on your list, Moyo. I would emphasize, the AS MUCH AS POSSIBLE with the debt. Yes, you should keep debt to a minimum. But in some cases, it is necessary. My student loans, happily, are at 1.5%, and they will be paid off in much less than 10 years. I think the important thing is to make a plan for it, and be prepared.

I especially like your point about leading a charitable life. Definitely very important to well-rounded finances.

By: Moyo

Moyo — Thu, 06 Nov 2008 21:20:50 +0000

True she would have to take a financial decision on her own, but my idea is learning to take such decisions without debt. So even if she has to take something on using debt in the future, she will carefully consider it.

Majority of people say having a college kid pay for their own tuition is “good financial education”, which is true, and some would argue also that having a kid pay for high school is good education also. I don’t think both are good.

definitely it is a pervasive phenomenon in the US for kids to pay their way through college, especially with school loans…..but I don’t really see the financial education in piling a load of debt at 8% to be paid of in 10 years, on a cash basis, it is good!

I guess the big question is this: whatever lesson an individual picks up from paying through school with a school loan, assume the lesson was learnt beforehand and he/she graduated without any school loan, would life be much better in the future?

So my point is this, if we want to give our kids good financial education, let’s teach them the following:
- stay away from debt as much as possible
- be frugal
- start a business and become an employer
- lead a charitable life