Help me help my son
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  1. #1
    Registered User Frugal Nurse's Avatar
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    Question Help me help my son

    I just finished a nice dinner with DS. He is 26 and will be 27 in July. He has a cushy job/career and is doing well (according to him). Probably better than most of his friends.

    Anyway...

    He will move back home in Aug/Sept when his lease is up. He is done with the frat house environment and wants quiet. He is returning to school for his MBA and needs study area. He will stay in the 3rd floor suite where DD2 and baby were. He doesn't need to pay rent - only needs to pay for cable (because I don't have it) and needs to buy his own food. (Or else he'll have to eat beans and rice and rice and beans with me. )


    He tells me he is getting excited to save up for a home. So, I asked how is the school loans were coming along?

    He owes $40K'ish and he said they weigh him down every month. I suggested he pay off his school loans first, then save. Put every penny into it.

    He thought it was better to save up for a deposit on a house while the market is a buyers market, then pay off the loans.

    He is afraid the market will turn and he'll lose his opp to get a decent home for low low price and low low interest rate. Plus he said he only pays 3% interest on school loan. I told him to check that interest rate - I think it's wrong. (He will do that).

    Which would you suggest? and why?


    PS.. his employer has $10,000 tuition reimbursement per year. He doesn't need to take out additional school loans for his MBA. nice bene

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    I heard the same thing when all of my friends were buying houses about 10 years ago. Everyone said I was missing out, but I felt that having a house would constrict my life too much. I continued living in an apartment cheaply, and paid off all of my current debt. At the same time, I saved up the 20% down payment to avoid PMI or a second loan. At that point, I started looking. Guess what? It ended up putting me in a better situation than my friends. Home prices had continued to drop, interest rates went even lower, and I didn't miss out on anything at all.

    Buying a home has so much more to it than just another monthly payment. Even assuming a person didn't have to repair anything for the first few years, which is rare, there's still a lot of costs involved. Higher bills, for one. It costs more to heat a house, water a lawn, cool in Summer, trash and/or recycling, and insurance (which probably will be added to an escrow account). Moving into a first house means there will likely be tools required for lawn or landscaping care. If things do need maintaining or repairing, it's either tools to do the job, or paying someone else to do the work.

    Let's add in the emotional aspect of owning a home. When something needs done, it falls upon the owner to get it resolved. Is the weather going to kill off all of my plants? The furnace sounds a little weird, do I need to start researching how to repair one? It's raining like crazy, will my gutters handle the load, or will it spill over into my window well and start flooding the basement?

    Personally, I'm glad I waited until I didn't have the burden of other debt. I'm doubly glad I wasn't busy worrying about things like an MBA. Owning a home is a good thing. Renting an apartment, or living in a good arrangement like your son, is also a good thing. Having an easy life, that's a great thing.

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    Registered User NikoSan999's Avatar
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    [QUOTE=Frugal Nurse;4111604068]I suggested he pay off his school loans first, then save. Put every penny into it.

    Which would you suggest? and why?


    Have to agree with you. Start to finish. Why? Re read what you wrote. It's true. It's fact. It's the smart thing to do. Shame Greebo doesn't post much anymore. He'd give it to you by the dollars, nickels and pennies.
    To much to lose. Housing market isn't going up any for quite a while. Betting it takes another bust. All these foreclosures haven't hit the market yet. Not near all. The banks are holding them. They're afraid to put them out there cause of starting another recession.
    Bank of America is THE godfather of Hell with Wells Fargo running neck and neck. When the world ends the only things that will be left are cockroaches, Walmart, Wells Fargo and Bank of America. Not necessarily in that order. The order remains to be seen.

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    Registered User Trishagirl's Avatar
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    I have a son your sons age & hewent to college & he'!s already paid off his college loans. He's debt free also & owns his own business so I would tell your son that it would be wiser to get that loan paid off instead of increasing g his debt. He needs to show some responsibility & digging out of debt instead of getting in deeper.

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    I have student loans that are federally subsidized. The interest rates are 2% and 1.78%. I'm back in college working on my masters and my student loans were automatically deferred and do not collect interest while I'm in college plus 6 months after I stop attending or graduate. He needs to find out which type of loans he has because unfortunately not all student loans are the same. During this deferment period I've been using the money to pay off other debt with higher interest rates. If he has no other debt and because you said it was bothering him then he should pay as much as he can afford on the student loans. Then start saving for a house. Good Luck!

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    Students loans are an albrostorouse ( sorry can't spell it) around your neck..Pay them first...He has no wife or children. a decent income....student loans first.. a house can come when it is time....

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    Registered User Frugal Nurse's Avatar
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    I agree ladies and gentleman.
    Mndtrp- you gave some good solid advice and seeing your personal way of doing it is helpful.

    I almost purchased him Dave Ramsey's book New as a gift, but I changed my mind. I think I will buy him a used copy. show him the way do he can show me the money.

    Alaska. He will check his rate. And thanks for reminding me about deferment. I forgot about that.

    Trishagirl. WTG!!! it was momma's fault he turned out so well. He has been a great son and I agree pay off the darn loan.

    OM I don't know how to spell it either! Lol. But it's true. He'll be paying for 10years

    Just as a reminder MBA won't cost him anything.


    Thanks for confirming my line if thinking. I have the villagers backing me up. Lol

    Today I will search and buy a used DR book.

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    I'm actually with your son on this. If he really wants to buy a house I'd save up for a down payment before accelerating payment on the student loans. Depending on his income (I have to guess based on "cushy job") the payments are probably easy to swing on his income. I also think interest rates have nowhere to go but up. The 3% probably is real and locked in.

    I would also have to consider time frame - can he save up enough in a year or 2? Is he planning on living with you rent free until he can buy a house? How long is that? How much extra does he have per month?

    And I know you didn't ask about this - but impress on him the importance of saving for retirement even more than paying off student loans or buying a house.

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    First of all....good job on raising your son! He is a smart young man with his head on straight! I would have to agree with the majority here....get rid of the loans, then save for house while doing the mba. All he needs is 20% or 3% if he goes with FHA loan.

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    Good point telephus. I did check on retirement and he contributes. I don't think he's maxed out because he pays so much in rent in Boston he has nothing left over.

    I did tell him he doesn't 'need' 20% to buy. But he would have to pay PMI or FHA fees monthly.
    He can stay as long as he wants. But he doesn't want to stay long. 2 years was his goal.

    A friend of mine suggested this:
    save save save. Continue to pay on school loan. When you have enough to pay off school loan decide then whether you want to or not. If not, decide if you're ready for a home. If not, continue to save save save until one or the other is acceptable.

    He pays about $600/m in student loans. his monthly housing cost $1000/m shared living. Then there's car, gas, food, gym, phone, and blow money. There might be some more in there. While living with me he saves $1000/m living expense and gas for his car because I am so much closer to his work.

    I'm almost thinking I could 'charge' him $1000 per month and put that in a savings account. He'd be forced to save.
    I think I'll broach the subject with him.

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    I would not pay off the loan. If he starts school full time again, his loan payments are deferred. I would save everything I could and not earmark it for anything. Once he finishes school, he can decide what to do with the money. I would second the idea of retirement to save on taxes since he's single.

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    Agreed Giro.

    I asked him if he wanted to pay me $1000/m to live here and I would put that in a savings account for him. forced savings. Then he'd have to live off the rest of his money and save what's left of that money.

    He thought it was a great idea and he will check to see if he could afford more than that. (He got a 10% raise this year which I suggested go straight to savings account)

    I also bought him the DR bundle package. I will give to him for his bday in July. After I secretly read it. lol

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    Pretty much any financial adviser that I've ever talked to says get rid of the debt. As far as the housing market going up . . . won't happen for awhile. When Obamacare gets into effect and whatever other huge destruction to the economy the lawmakers and administration put into place, the housing market will probably be even more of a buyers market in the future. The job market, probably not so good! Best to get the debt paid off. Then, at least you can live even if you don't get the house. Not trying to be negative. Just recognizing the reality of right now.

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    Why can't he set up a savings account and put $1000 a month (or more) into it on his own? Why does he have to give it to you as 'forced' savings?

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    And I didn't say that housing prices have nowhere to go but up - just interest rates.

    Actually, there's been a lot of articles lately about housing being in short supply because so many people are underwater that they aren't selling - so there's less inventory for sale.


    Housing: The bidding wars are back - Yahoo! Finance


    If you don't have time to read this article, here's the key quote:


    In Cambridge, Mass., two condos that could be combined into one large home hit the market two weeks ago for $800,000 each, according to Pat Villani, president of Coldwell Banker Residential Brokerage in New England.


    "The brokers stopped taking names after the number of bidders reached 250," she said. The winning bidder offered $2 million for both units.

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