Paying off daughter's debt

**disneysteve** · 03-15-2014, 01:05 PM

Originally posted by greensquare View Post

1. She created the problem, so let her figure out a way to salve it.

2. Help her pay it off so it doesn't ruin her credit, but set up a payment plan for her to pay me back the money over time.

3. Pay off the loan, but not pay for $10,000 of her remain education so she has to take student loans out for it.

4. Something else?

I think the right answer is some blend of the choices. First, does she realize that she totally screwed up? Has she gotten rid of the cards? Is she now on a good solid budget and living within her means? If so, then I probably would help her out if you have the means to do so.

How much can she contribute? What is her income currently? Can she add more hours or get a 2nd job to boost her income at least until this debt is repaid. What is her minimum payment? About $400 I'm guessing.

Where did she spend that money? Does she have anything tangible to show for it that can be sold? Or was it all on experiential stuff - food, travel, etc? I'd say she needs to be selling everything and anything she can to chip away at this. And obviously her lifestyle needs to be bare bones - no going out to eat, no movies, no travel - until this is paid off whether you help or not.

**Like2Plan** · 03-15-2014, 03:27 PM

How old is your daughter? I thought the new credit card law prevented college students (with no income) from getting a CC without a parent co-singing?

"There's also a provision that specifically concerns young people: Under the new law, no one under age 21 can get a credit card unless a parent, guardian, or spouse is willing to cosign or unless the underage person has proof of sufficient income to cover the credit obligations." Quote from:

http://money.usnews.com/money/personal-finance/articles/2009/06/02/how-the-new-credit-card-bill-will-affect-young-spenders

Has this been changed?

**corn18** · 03-16-2014, 08:27 AM

Tagging to follow.

**greensquare** · 03-16-2014, 10:42 AM

Originally posted by Like2Plan View Post

How old is your daughter?

She is 22 and a junior in college.

**greensquare** · 03-16-2014, 10:46 AM

Originally posted by disneysteve View Post

First, does she realize that she totally screwed up?

This is a big problem with the situation. She claims to feel bad about it, but there also seems to be an expectation that I will come to the rescue and help solve the situation. I don't want her to get the idea that I will always be there to help her out and it's why I'm taking a hard line on this so that she realizes that she is going to have to make some changes herself as well. I don't want her to become a person who feels that there will always be someone there to bail her out of her own mistakes and that she has to own them.

**snafu** · 03-17-2014, 07:34 PM

The school term will wind down shortly, exams in May. What is DD's plan May thru late September when classes resume? Does she have a job lined up? I think I'd have her put the cards in the fridge freezer, she is too immature to manage credit. She needs to create a budget for herself and stick to cash.

I'm guessing you've paid her tuition, books and core expenses. I suggest you ask her to sign a loan contract for the $ 10,000. payout, with rigid terms and condition. She could work off some of the debt by doing home chores at the current commercial rate for lawn service, cleaners or cooks.

Can you require she pay 28% of summer earnings for room & board to understand how it feels to be responsible? It's likely not feasible but you could require she read one of the easier books on finance like Wealthy Barber [Chilton] or Ramsey and explain it to you?

**doingitallwrong** · 03-18-2014, 05:33 AM

Originally posted by greensquare View Post

I don't want her to get the idea that I will always be there to help her out and it's why I'm taking a hard line on this so that she realizes that she is going to have to make some changes herself as well.

As one who has been bailed out by mom more than once, I say kudos to you on this. I absolutely appreciate my mom's help, and I have paid/am paying her back -- with interest -- but it took a long time before I really started to take responsibility for fixing the problem.

It's one thing to owe an anonymous creditor that will hound you mercilessly if you don't pay them on time, and another thing entirely to owe mom who knows your situation and is likely to be more flexible about missing a payment here and there.

Can you maybe offer to match what she pays, dollar for dollar? That way she still has the responsibility of making the payments (and getting the phone calls if she's late or doesn't pay the minimum), but the amounts are a little more manageable. It might be good to stipulate that if she pays late, or isn't making the (half) minimum payment, for two or three months in a row, your support will stop. (You can mentally amend that, of course, if she's really trying to pay the debt and it's just not happening for her.) I do like the idea of letting her 'work' for you, too -- cleaning the house or cooking meals are things that can happen outside of a job, so are a good source of extra income for her. Of course, you'd end up paying her twice for that, once as her 'income' and once as your match.

Once the credit cards are paid off, she should have a good foundation in debt payment (and a healthy desire for debt avoidance!), and at that point the amount you contributed (it would end up being more than $5,000, with the interest) would either become a loan payable to you, or an amount you don't pay for her college so that she has to take out a small student loan.

I know paying off the cards now and avoiding any more interest is ideal, but maybe that needs to be the cost of her carelessness. I think it will teach her a more useful lesson than if you just bail her out and have her pay you back.

**Eagle** · 03-18-2014, 06:20 AM

Originally posted by greensquare View Post

This is a big problem with the situation. She claims to feel bad about it, but there also seems to be an expectation that I will come to the rescue and help solve the situation. I don't want her to get the idea that I will always be there to help her out and it's why I'm taking a hard line on this so that she realizes that she is going to have to make some changes herself as well. I don't want her to become a person who feels that there will always be someone there to bail her out of her own mistakes and that she has to own them.

I had a cousin who was irresponsible with finances. In his case he would sign up for 3-4 classes and drop down to 1 course by the end of the semester. The reasons varied from he was "too busy", to "he didn't like the course material", to he "didn't want to make a C in the course", etc. This pattern continued throughout college and was finally cut short in his masters. Needless to say he took a long time to graduate and the costs... Well let's just say both degrees cost a lot more than they should've.

This is a lesson "kids" should learn early in life: There is no such thing as a free lunch.

Personally, I'd go with option #2 but I would only pay for half of it say about 5k. I agree with what Snafu has suggested regarding there being a written contract. The summer is fast approaching and she needs to get a summer job (maybe 2 or 3 jobs?) to pay you (parents) back and work towards the other remaining 5k. This means no fun and games this summer.

My 2 cents...

Here's a good list of suggestions for jobs for college students.

Paying off daughter's debt