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June 30, 2013

Should we pay off son's college debt?

Our son is about to graduate from law school. He took out a loan to cover the cost, but we’ve been paying on it for two years to help him out. Right now, the balance on the loan is about $76,000. We could continue paying it off, but my husband is hesitant. How do you feel about this situation?

It’s not a bad thing if you guys decide to continue helping him out by paying off the rest of the loan. But I don’t want you to feel as if you’re obligated in any way. No deal has been broken here, and you haven’t reneged on a previous agreement. But there’s absolutely nothing wrong with a young lawyer earning a living and paying off his own debt. He can roll up his sleeves and clean up the mess he participated in making.

If you do decide to pay it off, that’s an incredibly generous gift. In my mind, it should be met with much gratitude and appreciation. It should also be accompanied by a signed letter of agreement from him stating that he will never, except in the case of a 15-year, fixed rate mortgage, borrow money again.

In other words, I’d want to see some kind of permanent commitment and recognition of the fact that you guys have changed your family tree. I’d want this kid to be affected in a deep and profound way by this gift; so much that his kids would also be affected in a positive way by your behavior and by his in the years to come!

Is there a downside to refinancing your home often?

There’s really no downside to this, as long as each time you do a refinance you lower your interest rate enough to allow you to recoup closing costs before you move. In other words, you have to first make sure the numbers work.

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