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How to educate college son about loans?

Posted by wigardenerwannabe (My Page) on
Sun, Jun 15, 08 at 11:47

I am a single mother with one college age son. He just finished his first year of college. I was able to help him with much of his first year, but he still has $3,500 in student loans. (I had that much after 4 years in college!) I am feeling that at this point my money should be going toward my own retirement savings and paying down my mortgage (have a 30 year mortgage taken out when I was 46 years old...and don't plan to retire at 76....). Subsequently I planned to provide very minimally for him in the upcoming college years. My son is working construction this summer and had been told he would work 40-50 hours/week. However when it rains, which has been a lot lately, he doesn't work, so this has turned out to be more like 25-30 hours/week. Hopefully this will change. In any case, he went ahead and took out a loan for a motorcycle and now has an additional $2,800 in debt. From the time I first worked at 16, I've always been very frugal and conscientious about paying off debt so I have lots of concerns about how to convince him of the pitfalls of acquiring debt in such a cavalier fashion. I'm feeling frustrated and concerned about this....any thoughts on how to drive home the repercussions of his decision...or should I just let it go and let the school of hard knocks do what it will.


Follow-Up Postings:

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RE: How to educate college son about loans?

I vote for sending your son to the school of hard knocks.

I remember my parents warning me not to get a credit card when I was in college. But I got one anyway and started to rack up the charges. It didn't take long before I was in over my head. Surely my parents would come to the rescue.

When my dad saw what I had done he didn't get mad. He just shook his head and asked me "Well, now, how are you going to pay that off?"

It took me 2 years and lots of hard work, but I finally paid that credit card balance in full:)


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RE: How to educate college son about loans?

Unless he ASKED for you to teach him, don't bother. It will be a waste of your time.

And don't bail him out either!


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RE: How to educate college son about loans?

Stop 'helping'. If he can afford to buy a motorcycle he can pay room and board. Since he has 'transportation' he won't need to borrow your car either. I'd declare the Bank of Mom closed. He probably wants to be treated like an adult. Do that.


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RE: How to educate college son about loans?

Hi wigardenerwannabe,

While this is a thread of purely personal opinions, not professional advice... here's my 2 cents.

CUT with the loan support, period, end-of-story.

NOBODY (in any population center) needs to borrow money for a car. Used vehicles can be checked for safety and acquired for dirt-cheap, cash.

NOBODY needs to attend university for consecutive periods beyond what they can actually afford to pay for. YES, it is nice, and perhaps even preferrable... but not critical... AND if you young college gentleman doesn't personally see that attending college is worthy enough to pull out ALL the income-earning stops (including 2nd and 3rd jobs during the summer, including stretching employment into an unattended semester, including side-employment during a partial (or full) classload period... then your young student will likely be coasting through as though it were merely another extension of "free and required high school" classes anyway.

NOTHING is ever as valued as it is when there is a hurdle/threshold of effort to attain it... and generally, the value placed upon it is affected by how difficult that threshold is to clear.

Don't make the mistake of making it easier than the real world would make it... or else the real world will hand your young man his head.

Luck!
Dave


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RE: How to educate college son about loans?

My son was very frugal and made it through his first 2 years of school on his savings and part time work. Then he stopped going to school and worked for 2 years. He paid me only enough to cover his food and I was fine with that so long as everything was going into the bank and it was. He has now renewed his studies. He has a paying internship this summer. He is a way better student at 24 than he was earlier. He is nearly 25 and still has no transportation to call his own. He has one more year of college to go. He asked me how he could find a girl when he didn't have a car. I said "that's how you separate the wheat from the chaff" and I still believe that.


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RE: How to educate college son about loans?

As someone suggested (quite strongly) ... it's time for the Bank of Mom to be closed.

And he needs to be apprised of that situation, in case he hasn't been told already.

And has to have it made clear that he must paddle his own canoe (with the help of a $2,800. motorcycle, if he can figure a way to do that).

Can he find some alternate work to do when he's not working construction , e.g. cutting lawns, driving unlicensed retirees on shopping trips, errands, etc.?

You'll have to hang tough - be impervious to tears, being made to feel guilty, etc.

He'll have learned through the years how to push your buttons - don't let him!

ole joyful


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RE: How to educate college son about loans?

Learning to handle money and credit responsibly takes practice. This is a normal part of growing up. There comes a time when the training wheels must be removed so mastery of the "two wheeler" is possible. And skinned knees are part of the experience.

Add my voice to those who've suggested you close the teller's window! Patiently explain why you are doing so and help him figure out his options and set up a budget that is going to address his indebtedness.

I applaud you for realizing that your first commitment is to your own security and your retirement savings! You have a pretty firm grasp on the practical realities of the world; hold firm to your position.

I have several friends with children about your son's age and too many of them have cast all caution to the wind and personally taken on staggering debt to send their children to the "college of their choice" (this in ADDITION to mortgages, car payments, HELOCs, etc.). The very mention of the state university as a cost saving measure elicits rolled eyes... "you don't understand". No, I DON'T!


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RE: How to educate college son about loans?

we have a 20 year old son. Our ground rules are, you go to college (state) and pass the exams and we will pay for your college courses. If you don't pass, they we don't pay for any more courses, or you have to reimburse us for the one you failed. If you are a full time student, you don't have to pay to live at home. If you quit, then you have rent, food, phone, health insurance, car insurance etc to pay yourself. If you work, save your money for when you can't work (heavy school load etc). So far this has worked for us. He took one semester off and realized that school was a good thing! He is now transfering from a community college to a state university. He has no debt and has no interest in credit cards etc. Yes, we have been tough parents and may times have wanted to say, its ok we'll pay, but we also know that if he doesn't learn the value of money now, he will have problems later on in life.


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RE: How to educate college son about loans?

All good advice and much appreciated. Chelone,I think you hit on why this becomes a struggle for me personally. There are MANY parents that financially carry their children through college (and some beyond), and it is easy to get caught up with wishing that I could do that for my son (...and he can readily play that guilt card when he wants to). But the truth of the matter is that I can't, and I think I learned valuable lessons myself in putting myself through college. It turned into a '7 year plan', but I did it and there was a sense of pride that went with that. I also agree with bmmalone that the money lessons learned now divert them down the road. Now for the hard part of instituting it...........


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RE: How to educate college son about loans?

How old is your son?

Who is paying for the insurance on the motorcycle?

Is your son contributing to any of the household expenses? Is he aware of how much you have to pay for the rent/mortgage, utilities, groceries, etc?

Your son is working construction and has only been able to work half the time due to the weather. Perhaps you might want to consider charging him rent. What better way to help him to save for those 'rainy days' when he isn't able to work? At least he will become aware of what a 'fixed expense' is. You can always give this money to him after he graduates. When he is looking for a place of his own and isn't able to come up with the deposit.

Many parents can't afford to help their kids with college at all. I have a friend who's mother died when she was 5. Her dad passed away while she was still in her 20's. There were no other relatives to bail her out. She worked nights (full time) as a data processor in a law firm while attending college during the day. She took a few classes at a time. It took her a little longer, but she got her degree and is now working for the law firm as a paralegal making three times as much as she did in her other job.


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RE: How to educate college son about loans?

I've heard of parents who saved the 'room and board' money in a special account; didn't tell 'Junior' about it (!); presented it as a gift later -- when he graduated or married.


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RE: How to educate college son about loans?

I imagine it must be difficult to want to help your child every step of the way, to make their lives easier, perhaps, than your's was at their age. I don't have kids so I've avoided that minefield. But boy do I ever hear from my friends and their kids, lol.

I think about how my parents were with my brother and me (both are now dead). They were pretty much "all about" getting us to a stage where we knew right from wrong, listened to our consciences/inner voices, knew how to discern between "need" and "want", and were able to figure how and when to indulge "want" with minimal worry about how to fund it. Teaching us to be honest, resourceful, and hard-working was their goal. "Lazy" and "entitled" were probably the two worst things they could ever have called us; and the same could be said of the helpmeet and his brothers.

I hate to come down too hard on young people in general, because I know many fine, hard-working, industrious kids. But I do think there are a lot more very pampered, spoiled kids now and I have to say I hold their parents responsible (parents who are my age!). I think it takes a lot of guts to post the sort of question you did, Wigardener., would that more parents did!

You're right on this one; accountability and responsibility build character, even though the adjustments can be bruising (for both of you). You're right on this! don't let the "guilties" eat away at your resolve. Remember, much as you may want to, you are not in a position to foot the college bill. One day your son will reflect on this time in his life (the way I have in the past few years) and he will arrive at new appreciation for all you've given him.


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RE: How to educate college son about loans?

Everyone is right, but...many college-age students are unaware of the long-term effects of debt. That is why these students are such easy prey for cc companies and other lenders (including student loan officers, who talk about "good debt"). I have colleagues who will be paying off student loans till retirement! I have students who are $20-30000 in debt for undergrad degrees at a state institution! I don't think the reality of the situation hits till you multiply yearly loans times 4 and start making the payments.

So I don't have any good advice, but I do want to point out that youthful borrowers are victims too. (Yes, they are "adults"...but...)


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RE: How to educate college son about loans?

The age of being 'an adult' sure has risen! Remember "Eighteen and Out"? When you gradutated from high school you were an adult.

I'm all for education *for its own sake*, but when did a college degree become necessary for every job applicant who isn't in a trade?

High schools must be failing by and large if everybody needs a college degree, and colleges need to have *remedial* courses for freshmen.

I see many young people with expensive college degrees they cannot afford who are working in jobs (careers?) a HS graduate could handle. I'm not talking about new grads or anyone whose 'career path' will someday be enhanced by a degree -- just the ordinary jobs pushing papers or selling (oops, 'marketing') that make up most of commerce.

Perhaps employers just want someone at least 22, not that many consider someone that age to necessarily be 'an adult' today.

So...when DOES one become 'an adult' in your opinion? I'm putting my money on responsibility over age or education.


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RE: How to educate college son about loans?

Our kids are still pretty little, but we've already started saving for their college educations. We hope to have roughly two years saved for each of them. They'll need to work summers and after school to save the rest.

We're also going to make it pretty clear that if they want to go to an out of state or private school they'll need to earn a scholarship.


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RE: How to educate college son about loans?

Eric Tyson (of the For Dummies series of personal finance books) writes that the best investment you can make on your kids' behalf is to secure your own retirement. My mom retired after working many years for a company (OK, the Catholic Church) that figured reward was in heaven and had a terrible retirement plan. She was never a spender, didn't carry debt, but just didn't understand that she needed to put some extra money aside. She died two years after retiring but if she hadn't, her standard of living would have been very modest and she would have needed help from the kids as soon as they were even remotely in a position to help her. And this "help" might have lasted for decades at ever escalating levels. So imagine the vast wheeze of relief when the kids find out that mom/dad have solid money in the bank to carry them through to the end. In terms of retirement investing, money set aside when your child is a baby could contribute hugely to your final nest egg due to the long time frame.


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RE: How to educate college son about loans?

If you have to choose between saving for your own retirement or saving for your child's education, I agree: you should save for your retirement. But, I don't think it always has to be such an either/or approach.

When you begin saving early and often, you can probably save for both. You probably won't be going on too many exotic vacations and your retirement may not be that fancy, but saving for both can certaintly be an option.


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RE: How to educate college son about loans?

I was on the 12 year plan for undergrad, then went to vet school and just graduated at 36 years old. My mom paid for 1/2 of my first year of college, but when I quit after discovering that I *hated* architecture and had no idea what I wanted, she wouldn't pay any more. Oh well. Got through undergrad without loans, since I worked full time and went to school part time. There is no part time option in vet school- it's 22 hours/semester, take it or leave it. So I had to take out loans to make up for my lost salary, unfortunately. Good thing I have a good job, because $100,000 in loans HURTS.


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RE: How to educate college son about loans?

"I am feeling that at this point my money should be going toward my own retirement savings and paying down my mortgage." ABSOLUTELY.

As far as the motorcycle, I vote for the school of hard knocks. The loan payments and insurance will take their toll eventually, and you should not pay any of it.

I would figure out a set amount that you can contribute to schooling next year, and that's it. He might have to go part-time and work part-time, or he might have to switch to a communty college (if he's not at one) to get the lower level work done. I would not take an angry attitude with him, but rather one of explanation of your own circumstances.


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RE: How to educate college son about loans?

Meghane how would you like $85K in loans in 1990, the year I graduated from medical school? I think I've got you beat after adjustment for inflation and I still had 5 years of training ahead of me on the peanuts salary that they don't mention on Gray's Anatomy.

So since you "just" graduated, take it from a pro, DO NOT RAISE YOUR STANDARD OF LIVING. I was in academic medicine for a decade and I saw lots of residents who finished training and then chose not follow my sage advice. They loaded themselves up with consumer debt and then discovered they hated where they were living, didn't like their boss, weren't getting the income acceleration they expected, etc.

OK you can raise your standard of living a teeny bit. Pick one thing that would make you happy each and very day, maybe it's a stereo system, a set of nice cookware, a flat screen TV, a new set of mattresses, or permission to run the AC a little cooler. Give yourself that, and nothing else until the first 20K is down. And so on. Send three payments a month if you see your checkbook looking plump by the 15th and the 21st.


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RE: How to educate college son about loans?

chisue: "I'm all for education *for its own sake*, but when did a college degree become necessary for every job applicant who isn't in a trade?"

I'd say about 20 years ago. Having been an HR Director in a past life, I can tell you that an undergraduate degree these days is what a high school diploma was in previous generations: it will get you an interview for an entry-level position. And if you want to advance up the corporate ladder, you better have a graduate degree.


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