Need advice for a debt issue

[Deleted]

DH and I hit a rough patch a couple years ago so his father, who is rather well to do, wrote us a pretty big check to get us back in black. He told us to pay it back interest free as much as we could. He recently decided that he wanted to start a college savings plan for our son and that any money we were going to send to him should just go to the college fund. My question to everyone is would you consider this a debt? Once we get our HELOC paid off this will be our only non house payment we owe. If we continue to pay what we have been sending it will be 8 years before we have fulfilled our payback. That would be right around the time DS would start college should he chose to go.

[Deleted]

Debt? No. It's college money for your son. Sounds like a swell idea to me! And generous of DH's father. I say start making those deposits because those eight years are gonna be here in what seems like the day after tomorrow.

[AgeOfEnlightenmentSCP]

Once we get our HELOC paid off this will be our only non house payment we owe. If we continue to pay what we have been sending it will be 8 years before we have fulfilled our payback. That would be right around the time DS would start college should he chose to go.

I would consider this a debt, and I'd keep paying and I would send your FIL deposit slips in lieu of payments.

When the HELOC is paid off- add that amount to your monthly payment, and keep right on paying it towards the amount until it's done.

FWIW, I don't like line-item-specific, limited accounts like "college savings" accounts. We had kids late, so IF we pay for college (it's by no means a given) we'll be able to pay from our IRAs with no penalty anyway. Just a thought.

[angel007]

Debt? It started out that way, but it appears that it has been turned into a wonderful gift to your son, from his Grandfather. I'd just do exactly as your FIL wishes, and deposit it for the next 8 years into your son's college account. (If you need to think of it as a debt, in order to make sure it gets into that college account, by all means do so..)

[❤ mollymouser ❤]

I think I would still think of it as a debt, and would treat it as such ~ faithfully making payments and such ~ even if I stopped referring to it as a debt for other general purposes. But I would definitely include it in my budget (as I'm sure you are), and I would make sure that my FIL (Father In Law) knew that we were faithfully making "debt payments" to the college fund.

[joynerk]

Dec 22, 2010 23:28:35 GMT -5 @angel007 said:

Debt? It started out that way, but it appears that it has been turned into a wonderful gift to your son, from his Grandfather. I'd just do exactly as your FIL wishes, and deposit it for the next 8 years into your son's college account. (If you need to think of it as a debt, in order to make sure it gets into that college account, by all means do so..)

I agree! It's a "forgiven debt" but you should still see it as an obligation that needs to be fulfilled. How would you feel if you made your regular payments to your FIL and tried to put aside money for your son, then found out much later that your loan was going to your son's college? Now you don't have to worry about that! You can also have the peace of mind that there will be money for your son's education.

[cronewitch]

I would consider it a debt and if you don't have a tragic event you should pay it back 100%. If you can't get it done in 8 years you can continue the next 4 while he is in college.

[carolinagirl]

I really like palmbeachpaul's idea of sending FIL the deposit slips each month so he can see your good faith at making the deposits.

[Deleted]

Thanks everyone FIL has the account in his name so he sees everytime we put money in. We are so blessed to have him!

[merryheart]

I say you have been blessed! And call it debt if it is easier for you to keep making the payments. It really is still a debt that you intend to pay back.

[moneywhisperer]

It is a debt for sure if the account is in FIL's name.

I would make the agreed repayments, but I would not count on it for college funding since FIL could need the money later & decide its not for college after all. That is why it is better to think of it as the original debt.

[Anne_in_VA]

I'd consider it a debt, but pay it off just as your FIL wants. What a wonderful idea for your FIL to use the debt payment as a college fund.

[Opti]

Dec 23, 2010 9:20:02 GMT -5 @misttan said:

Thanks everyone FIL has the account in his name so he sees everytime we put money in. We are so blessed to have him!

I think you should consider it a debt since you are paying to
FIL's account. He could always change his mind so either way
you would be good - a fully paid off debt or college money for
your son.

[Deleted]

My question to everyone is would you consider this a debt?

I would consider it a debt even if he "gave" me the money. I am an adult & believe that we are expected to make our own way in life (& stand on our own 2 feet). Sure we might need help every now & then (when I need help I borrow from banks) but that doesn't lessen our responsibility to set an example for our kids & to be responsible adults. Just my way of looking at it.

[haapai]

I'd consider it a debt. I'm not sure what I'd call it in polite conversation with others, but privately I would consider it a debt with a high interest rate and some hefty non-payment penalties.

Making a generous, well-to-do relative happy has a high rate of return. Making such a relative unhappy will cost you.

I know that's incredibly crass. If I knew you or was speaking to you face to face, I'd have to find another way to put it or keep my mouth shut. Here, in this forum, we can all be relatively blunt.

[cronewitch]

Dec 26, 2010 18:45:40 GMT -5 haapai said:

I'd consider it a debt. I'm not sure what I'd call it in polite conversation with others, but privately I would consider it a debt with a high interest rate and some hefty non-payment penalties.

Making a generous, well-to-do relative happy has a high rate of return. Making such a relative unhappy will cost you.

I know that's incredibly crass. If I knew you or was speaking to you face to face, I'd have to find another way to put it or keep my mouth shut. Here, in this forum, we can all be relatively blunt.

I agree stiffing family is one of the worst things you can do. Banks and credit cards are businesses without feelings but family has feelings and long memories. They also talk to each other so more than one person knows of your ethics. Mom had a grand daughter ask her to cosign for a car, mom said "no" because cosigning is bad. Instead she paid cash for the used car and sold it to the grand daughter. She paid 3 payments then the car needed repair and she said she couldn't afford to keep making payments. I can't be the only one mom told. Another granddaughter bought a house from mom on contract and brings her a check every month. She bought a condo to sell to a grandson, he paid a while then stopped paying and stopped talking to her. His dad and grandma called him on the carpet and got him in line again and he has paid every month the last 12 years or so and is almost done. She reduced his interest to zero because she didn't like dealing with interest.

We all know in the family who is good to lend money to and who to avoid. Cheat grandma and lose credit with all aunts and uncles too. Sometimes family is the only credit you can get when you don't have a job or are trying to buy a business.

[Deleted]

Oh no we would never not pay him back. I think more what I meant is should I snowball it like we are doing Heloc or should I just continue sending the same amount for the next 8 years. We are so blessed to have someone who cares like him.

[Plain Old Petunia]

I would pay the Heloc off first. Once it is gone, you can divert some cash flow towards your son's college expenses if you so choose. How much longer until it has a zero balance?

[Deleted]

Heloc or son's fund? Heloc will be gone this year. Depending on how much we pay toward his fund will depend on how long it takes to pay it off.

I forgot to mention that we didn't ask for a loan, his dad actually decided for us. Like I said blessed!

[money100]

Misttan, that's a pretty cool FIL. I also agree with the other folks that it's best to think of it as a non-negotiable repayment. Your lucky son will get a great gift in a few years and you'll keep your FIL's respect.

[haapai]

Are there annual limits on contributions to the college savings account in question? It sounds like your father has set up a 529 plan or Coverdell ESA.

[crockpottin]

Wow, you are quite lucky to have such a generous FIL! I would deal with the Heloc first if you're snowballing. In the meantime, though, keep making whatever payments you agreed to originally with FIL. Good relationships like the one you have are definitely worth keeping up!

[emptypockets]

pay your HELOC off first, as it affects your FICO credit report. When your HELOC is paid off, apply that payment amount to your repayment to your FIL. while the goal is to pay for your son's education, by that time, your FIL may have health issues and need that money for his old age. If all is well by then, you will have that mental/financial security of having enough for your son's college. However, to give your son the same fiscal responsibility, hope your son also works his way through college with supplemental funding from your FIL's account.

[bobbysgirl]

Here, in this forum, we can all be relatively blunt

With this said by another poster I will jump on to say: It would be the ethical thing to do to comply with FIL's wishes. He trusted you and it's hard to do that in today's environment. It's an intangible that doesn't have a price tag, but is worth it's weight in gold.

Since your HELOC willbe paid this year, can you talk to him about diverting the cash to pay off the HELOC quickly, then pop more into the college fund to pay back the debt a bit quicker? It's just a thought. (I think I have a touch of OCD!)

[motherto2]

what an awesome gentleman to help you out without you having to humble yourself and asking for his help. I would definitely finish up the heloc (continue paying FIL at the same time) and then accelerate your payment to him. A couple of reasons - first, as others have noted, he might need that money later, so it would be nice if it's there if he needs it. Second, once you pay him off, you can continue to sock the same amount away to supplement the funds your FIL is planning on for your son. And, if he did need the money, you will be ahead of the curve by saving some of your own. Congrats on paying your debt down. What a wonderful feeling!

[Nazgul Girl]

'' I'd consider it a debt. I'm not sure what I'd call it in polite conversation with others, but privately I would consider it a debt with a high interest rate and some hefty non-payment penalties.

Making a generous, well-to-do relative happy has a high rate of return. Making such a relative unhappy will cost you.

I know that's incredibly crass. If I knew you or was speaking to you face to face, I'd have to find another way to put it or keep my mouth shut. Here, in this forum, we can all be relatively blunt. "


I agree wit exactly what you said, Haapai, and I don't think what you wrote was bad at all. My father reacts exactly like that. He is very generous on his own terms, but if you borrow money from him, don't screw around with the repayment terms or there will be some bad blood. ( Barring a tragedy, of course ).

[Tiny]

I think I'd "hedge" my bets...
You say you can pay off the HELOC in a year (while making payments to your FIL)
You also say your FIL will use the paid back money to pay for your son's college.
You also say the Account is in your FIL's name.

I'd definitely repay your FIL. I'd let it go full term (the 8 year payback). Instead of pre-paying the debt to your FIL after paying off the HELOC, I'd first consider your own retirement savings - if they are not up to snuff I'd put any extra money there first. If you've got retirement covered, I'd then look at saving money for your son's college. There's no gaurentee your FIL will make the money you've paid back available to your son. Alot can happen in 8 years. Unless of course the money you are paying back is going into one of those special "college fund" type accounts. Your FIL might need the money himself in 8 years and so your son wouldn't get the money. Not to imply that your FIL will renege on his promise. Your FIL has done you a great favor by giving you the money in the first place.
I'd hedge by saving some additonal money for your son... in the end it's win-win. You pay back your debt to your FIL, if the money your FIL set aside is used for your son's college - you've got your own savings to do what you will with - if your FIL's money doesn't materialize for your son - you can still help your son with college expenses. No bad feelings, no family falling out, no son bitter about "not getting the college experience he was "promised"". You can't ask for much more than that!