reserve $ for college v. pay off debt

**Angio333** · 07-06-2008, 08:44 PM

Are you sure you need a loan to pay off the credit card debt? have you tried other approaches like budgeting and attacking it using the snowball method? I am always worried about taking out debt to pay debt.

Another thing you can do is start saving money now for next year's school bill. You can also have your daughter pick up a part time or full time job to help pay for her expenses, blow money and tution.

**ActYourWage** · 07-07-2008, 05:31 AM

I agree with Angio333. Paying off debt with debt is not the way to go. Start with a budget and plan out your monthly expenses. This will help you see were your money is going. Save hard and the daughter could get a part-time job or something that makes a little income to help off-set the cost.

**Fizgig** · 07-07-2008, 07:23 AM

I don't have kids, so I don't know how it feels to want to provide for your children. Still, it makes me sad when parents go into debt for their child's education.... I really wish it didn't have to be that way.

No money advice from me, but I hope she's doing her part as well. I was perfectly happy to finance my own education (graduated 2001) - scholarships and doing the first two years at a community college eased the load tremendously.

**ceejay74** · 07-07-2008, 08:26 AM

I would pay off credit card debt as much as possible, but not with loan money. Put whatever's left over of the loan back toward paying it off.

As for your daughter, pay what you can for her, but then have her take out loans for the rest. They won't come due till she graduates, and in the meantime you and she can both contribute to saving up for paying them off. But credit cards, and whatever this loan is, would be my first priority over paying cash for college.

**jIM_Ohio** · 07-07-2008, 09:25 AM

You don't list enough to even give a general response.

I think you hint you have enough cash flow to pay off debt (10k) within a year. If this is the case, look at the TIME it will take to be debt free with the refinance plan.

I would start to ask the following questions:

1) what is the cost (in time and $$) of borrowing the money for year 1 of child's education?
2) what is the cost (in time and $$) of using current cash flow to pay off cc debt?
3) what is the cost (in time and $$) of consolidating debt onto house?

You cannot ask about 3) without presenting data for 1) and 2) at same time.

Only you can put a value on the time it will take to be debt free.

IMO I would finance the kids education (in their name), pay down cc debt in one year, then ask this question again in 2009. You will have one less problem to solve (cc debt) and might see some financial light at the end of the proverbial tunnel.

**PrincessPerky** · 07-07-2008, 09:37 AM

why would you take out a loan for your daughters college? even if you decide to pay for it, getting a student loan is much cheaper on interest isn't it?

**disneysteve** · 07-07-2008, 01:04 PM

Originally posted by PrincessPerky View Post

why would you take out a loan for your daughters college? even if you decide to pay for it, getting a student loan is much cheaper on interest isn't it?

Nope. First, there are limits (pretty low limits) on the subsidized loans that students can get. Once you move on to private loans, the rates can go through the roof. 12-15% isn't unusual. So the usual progression is Stafford loans (student), PLUS loans (parents), home equity loans (parents) and private loans (student) only as a last resort.

**maat55** · 07-07-2008, 02:02 PM

Originally posted by cndh17 View Post

My husband and I are doing a cash out refinance to pay for our daughter's first year of college and pay off $10K in cc debt. But now I'm thinking we could reserve that 10K for next year's tuition, and just keep paying on the cc debt as we have been. What would be the best decision financially?

Payoff the cc debt and save monthly towards next years college.

**jIM_Ohio** · 07-07-2008, 05:15 PM

Originally posted by disneysteve View Post

Nope. First, there are limits (pretty low limits) on the subsidized loans that students can get. Once you move on to private loans, the rates can go through the roof. 12-15% isn't unusual. So the usual progression is Stafford loans (student), PLUS loans (parents), home equity loans (parents) and private loans (student) only as a last resort.

But in this you make the comment about subsidized, then immediately skip to PLUS. There is a HUGE gap between these- and unsubsidized loans should be considered in this gap. If 40k loan, probably not a good idea, but I had some 5k tuition bills which I received for my senior years (I had 3 of them) which really did not cost me much (7% interest rates) which were better than the subsized and PLUS or subsidized and private combinations.

**OverSaver** · 07-08-2008, 12:59 AM

The problem with holding off on getting rid of the debt is that interest will continue accumulating, however if you guys have a plan to pay off the debt and be able to pay the first year of tuition than you guys should go for it. You could also have your daughter look into Grants and Scholarships because that could make the financial situation of college a bit easier to manage. If you guys don't see the interest accumulation as a big problem than I would say invest in the college fund. However, it is also possible that you guys could pay of the debt and look for a loan with lower interest and go that route although that is never a fun option.

**anonymous_saver** · 07-08-2008, 07:56 AM

Pay down your credit card debt first, absolutely.

Then when you have "reworked" your monthly cash flow, pay for your daughters education that way.

Are you contributing to your retirement currently? If so, how much?

reserve $ for college v. pay off debt