Pay Dirt is Slate’s financial advice column. Have a question? Send it to Athena and Elizabeth here. (It’s anonymous!)
Dear Pay Dirt,
My mother-in-law is in her late sixties and has well over $ 100,000 in student debt that she has no plans to pay off. In fact, she told me and my husband over and over again that her plan was to go to school until she died to avoid paying back! She has two master’s degrees and is now applying for a PhD. program in a social science field where, even if she got a raise, she would have no hope of earning enough to pay off her loans. I would (obviously) prefer her to at least consider paying off her loans, but I also think student loans are predatory at best, so it’s not a battle I’m willing to have with her – unless we not be at his expense. behavior after his death.
My husband and I together earn half of what she does, and we barely earn month to month. Getting into debt over $ 100,000 would be catastrophic. I’ve always assumed student loans are canceled on death, but I’m afraid she’ll take some from non-government lenders and we’re hooked here. We never co-signed anything for her, if it’s relevant. Is this something I need to be worried about, and if so, how can I have this conversation, despite my own reluctance?
-Not the inheritance I’m looking for
So the short answer about inheriting your mother student loans is that you may or may not end up with debt – it just depends on who the provider is. Death is an emotional roller coaster on top of a paperwork nightmare, and banks don’t make it easy, so let’s get started.
Federal student loans taken out by a borrower are dischargeable upon the death of the borrower, so you will not be required to pay their federal loans. Private student loans are another story. Some private lenders will allow the release of remaining student loan balances upon the death of a borrower. Others will choose to go after that person’s estate upon death, which will result in the account being settled in court at a probate hearing. Depending on the size of the estate and the remaining assets, the debt could still be written off, as it cannot be left with anyone else to pay, even if they are the borrower’s next of kin.
So you don’t need to have a conversation with her about her student loans. But make sure your husband understands the ramifications you will face if he is left in charge of his estate. At least then he can have a list of borrowers and know who can come and call when it’s time.
Dear Pay Dirt,
I am an academic in my early 30s with a decent paying job (around $ 60,000 per year) and plan to stay in my relatively underpaid field in the future. A few years ago I had a terrible car accident, which luckily survived with only minor but permanent damage. The lawsuits that followed this accident were lengthy and were finally resolved about a year ago. I had good lawyers, and even after paying them their share of the settlement, I ended up with healthy compensation in the six figures. I used some of it to reduce my unpaid debts and invested the rest in several mutual funds with varying degrees of risk tolerance.
However, I don’t really know what I’m doing financially. I had a phone call with my parents’ financial planner, who advised me to pay off some of that debt and invest most of the rest. He also offered to manage my portfolios, at a relatively low rate for such a thing (less than 1%). But I don’t know if it’s necessary. I have a set of numbers small enough that it seems like overkill to pay someone to watch it all the time. I was hesitant to visit a paid planner. At what level does it make sense to have someone manage my money rather than doing it myself with the occasional contribution of a paid professional?
—I earned my money the old fashioned way (got run over by a Lexus)
Dear run over by a Lexus,
You said you had minor but permanent damage to your body. It might not be a big deal today, but it gets worse over time, especially to the point where you may not be able to work anymore. For this reason, in addition to having funds in the six figures, I think you should hire a certified financial planner.
It’s generous that your parents’ CFP offered to manage your portfolio, but even if you had to choose another, it’s usually worth it with this level of savings. When you have a good active planner, they are there to make money with your money which negates any fees you would have to pay them. This is otherwise known as an alpha advisor. I would go with this strategy for at least a year. You can always choose to stop using a planner if you don’t see the return on your investment and can return to a fee-based advisor when the situation calls for it.
Dear Pay Dirt,
I have a good friend whose husband died five years ago from cancer. My friend had been a stay-at-home mom but quickly returned to the workforce as a teacher. She seems to have enough money to continue living comfortably.
But I recently learned that she is still using her deceased husband’s credit card. I guess she didn’t have one in her own name but was an authorized user on her account. She does all the banking online and pays the bill every month. While I persuaded her to open a card in her name, she still insists on using her husband’s card as she has accumulated a lot of miles and other perks. I’m worried about her, especially since I recently read that Gabby Petito’s fiancé has just been charged with bank fraud for using someone else’s debit card. How many problems could my friend have using her husband’s card? How likely is she to get caught?
You are right to be concerned, because using a deceased person’s credit card, even if you are an authorized user, is illegal. She needs to stop right away and get legal help on how best to close these accounts, now that he’s been dead for over five years and has continued to use the card. Since she is not a joint account holder, but rather an authorized user, this is considered fraud. It can even be sued and prosecuted. Encourage her to stop and find a lawyer who can help her clean up the mess.
Dear Pay Dirt,
I graduated from graduate school with a ton of debt and in the middle of the Great Recession. I felt like a fool for taking so many loans. It took many years, but I’m finally debt free. One of my close friends, “Kim”, was in a similar situation. One of the ways Kim and I got out of debt was through side activities. We both realized too late that some of our ideas and jobs would have been great in college and could have drastically reduced the amount of loans we needed, but our parents told us school had to be our main focus and that the loans were more than worth it.
I recently saw Kim’s preteen daughter for the first time in about a year. Her daughter now takes every possible opportunity to earn money. I made a comment about school, and she brushed it off like school wasn’t important. I feel like she is so focused on money that she is no longer a child. I think there is great value in school and great value in understanding the value of money, but I don’t want my children’s childhood to be ruined by the idea that they have to know how to make money right away. How do I distinguish between instilling value for money and entrepreneurship and making my kids believe that making all the money they can is the most important thing in life? I would never give up my college education, but I also wish I had known how to make money before I started.
-I want to prevent my children from becoming little money monsters
Dear little money monsters,
Kim’s daughter may have brushed off your comment about the importance of school because she might not be interested in attending college. There are many ways to have a great career without going to school (military and business schools, for example), so she may already have a sense of what her path includes and what doesn’t.
If you want to start instilling the value of money in your children without pushing them into the depths of capitalism, there are a number of ways you can do it. First, help them set a financial goal. It can be a variety of different things when you’re a kid, but the most common include buying an electronic device or going shopping at a popular store. You can share with your child different examples of how they can achieve their money goal, which can include making money from housework or taking a sideline.
You can also sign up for an app like Greenlight. Greenlight allows you to teach your child different money management strategies that include spending, investing, saving, and allocating. When children see their parents adopting positive financial habits, they are more likely to follow suit. So whatever you do, just remember that your kids are different from Kim’s, and it will be your footsteps that they will follow. Good luck, mom, you got it.
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My husband is the stay-at-home dad of our 1 year old daughter. I appreciate everything he does and feel lucky that he takes equality in our marriage seriously. But his unemployment has put a strain on us financially, and I’m consumed with jealousy that he can stay home. He quit his job because he suffered from depression. I had hoped – and expected – that he would find a new job before quitting. He was making more money than me, which cut our income by just over half. Our priority is his mental health, but it has been 10 months and he is no longer in pain. Our savings are depleted and my paycheck only covers the bills, so we can’t afford any fun stuff or emergencies.