SMART MONEY: Second job would help retire student loans
DEAR BRUCE: Our daughter went to school to be a veterinarian assistant. Her student loan rate was 3 percent. Three years later, her student loans increased to 6.5 percent and 7 percent. She now pays $200 per month, interest only, because it’s all she can afford.
She says that she cannot even think about marriage and starting a family when she is in debt. She owes about $35,000. She is very frustrated, and so are we in watching her struggle.
When the government took over these loans, the rate doubled. Is this how we take care of our young people and encourage schooling to get ahead? The only encouraging thing we have heard is that after 30 years, her unpaid balance would be forgiven. By that time, she will have paid $72,000. — N.B., via email
DEAR N.B.: I can understand and sympathize with your daughter’s situation. I have no notion as to how much money she had to borrow, as opposed to how much she wished to borrow rather than work, when she was in school, but the fact remains that she now owes about $35,000.
That she can’t even think about marriage is distressing, however I don’t necessarily agree. As to the family, that is a different matter.
Were she to get an extra job, over and above her regular job, at $5,000 a year, she could unload her debt in five years or so. With her skills, this shouldn’t be a difficult thing to find. There are many veterinary practices that work on weekends and pay substantial wages to folks who are willing to put in those weekend hours.
She also might be able to find a lower interest rate. I am no expert in that regard, but I can certainly suggest that she talk to the finance people at her school. They may be able to help her.
Let’s face it, she got herself in this situation because she wanted to better herself and she has a $35,000 investment in herself. You didn’t indicate how much she earns, but as a young person, if she puts in six or seven days a week, she should be able to dispose of that loan in a reasonable amount of time.
The fact that many kids are doing it is testimony that it can be done.
DEAR BRUCE: I have a pipe dream and would like your opinion on the idea. We own our own home, worth about $450,000. We have an IRA with $50,000, savings of $60,000 and $150,000 in the stock market. Our income is $55,000 a year.
As you are well aware, the stock market is not all that stable. I am wondering if we should sell our stocks and purchase a vacation home near one of our sons. One lives in Sacramento, Calif., and one in Sparks, Nev. We would probably use the vacation property on several long weekends. Our visits now are only on weekends, and we stay at their homes.
I am 87 years old and my wife is 85. We have no debt other than utilities and living expenses. — R.R., via email
DEAR R.R.: You say you have a pipe dream? I don’t find it a pipe dream. If you want to buy a vacation home, I have no problem with that. But I don’t think it’s the wisest thing to do from a financial point of view.
You say stocks are not all that stable. I consistently point out that if you invest in conservative, dividend-paying companies, then the stock market can be one of the best places to have your investments grow.
That being observed, at your respective ages of 87 and 85, purchasing a vacation home doesn’t seem to be the best choice. On the other side of that, there is no reason in the world why, in either the Sacramento or Sparks areas, you couldn’t find an attractive and useful vacation property to rent. You wouldn’t have the responsibility of upkeep, and as a practical matter, how many years are you going to be able to go out and vacation? I think you should start the vacation immediately, but I would consider leasing a home rather than purchasing one.
Send questions to email@example.com. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided. The Bruce Williams Radio Show can now be heard 24/7 via iTunes and at www.taeradio.com. It is also available at www.brucewilliams.com.