Check with schools for lower-interest tuition loans

Dear Bruce: I took out a loan for my son to go back to school for computer networking. The interest rate has gone from 8 percent to 13 percent. I would like to find a source to reduce the rate to an acceptable level. – L.P., via e-mail
Dear L.P.: You should check with the school where your son is studying. They may have access to less expensive money. By all means check to see if there are any government student loans available. If not, as a homeowner you might be able to get a home equity line of credit, which generally is a bit lower and also is deductible if you itemize on your taxes. You might check to see if your son’s schooling would qualify you for a loan for undergraduate students. While these loans must be repaid almost immediately, you might find a bit more favorable interest rate.

Dear Bruce: I am a single parent on a very fixed income. In 1983, I took out school loans totaling $11,000 over a seven-year span. I got an associate’s degree in environmental services management. The school said I would have an easy time getting a job in that field making decent money. Wrong! I ended up taking a job at a hospital as a housekeeper making minimum wage and working my way up to a secretary 10 years later. My mom died five years ago and left me $10,000. I offered the loan company the $10,000 as a settlement, but they would not accept it. My loan has ballooned to $30,000 with no hope in sight. I don’t have an extra $300 a month for the next 20 years. I have gone to a volunteer lawyers association and they referred me to two lawyers who would not touch the case. I feel hopeless, desperate and need your help. – K.R., via e-mail
Dear K.R.: I don’t know what can be done. As I’m sure you know, ordinarily tuition loans are not discharged through bankruptcy. You were obviously misled by the school and that is not an uncommon thing. To compete for students, many advisers are overly enthusiastic about the job prospects as a result of studying in their institutions. The reason the attorneys didn’t want to handle your case is most likely because they didn’t feel you could afford their fees. While you can’t discharge the obligation through bankruptcy, they can’t get blood out of a stone. If they are persuaded that it’s in their best interest to settle, they will do so. I hope you can find an attorney to handle the negotiation. I empathize and truly wish you well.

Dear Bruce: My wife and I have a combined annual income of $100,000. She wants to return to graduate school for two years. This will reduce our annual income to about $70,000 to $75,000, depending on how much her graduate student stipend will be. We have $15,000 in savings and checking accounts. We have a $780-a-month mortgage payment for seven more years, a $330 monthly car payment for 2 1/2 years and a $4,000 annual high school tuition payment for two more years. There is no credit card debt, and I can honestly say that we are cautious about how we spend our discretionary income. I am concerned that the $15,000 in the checking and savings accounts will not hold out due to the income reduction. Is there a formula for calculating how much savings are necessary when reducing income? Do you think the $15,000 is enough? – A.C., Cincinnati, Ohio
Dear A.C.: I’m confused about your question as to whether the $15,000 will “hold out.” Are you asking if you can maintain the $15,000 with the income reduction? I can’t say definitively, but you are living well within your income. Unless there are other expenses that you haven’t articulated, I see no reason why your family can’t get along quite nicely on your income alone. It may be that your retirement savings may suffer for a time, but it should be noted that many families are living on substantially less money, with similar debt loads, which are also preparing for their retirement. I can see no financial reason why you folks can’t proceed as you have planned.

Dear Bruce: My wife and I are looking at different options to save money for our 2-year-old daughter’s college education. We have been slowly saving in a Coverdell account. When we met with our financial adviser, who also is a representative for a large insurance company that offers investment products, he said what we were doing was great. But as we went along he took note that we only had a $10,000 whole life policy on our child. He was trying to steer us into buying more whole life coverage for her rather than save for her future. What is the right way to go? – N.C., Independence, Iowa
Dear N.C.: Your financial adviser may very well believe what he or she is telling you, but I surely don’t. I don’t know why you have $10,000 whole life insurance on your child now. Life insurance on a little child is throwing money down a hole. I commend the Coverdell account. There are other tax-friendly ways to save, but life insurance is not one of them. It seems to me that your guy is thinking more of his future with high commissions than of your child’s education.

Dear Bruce: My father bought my son a savings bond for college many years ago. Now it is college time. What is the best way to use these so our taxes won’t be horrible? Any other information you can give us on this subject? – Cindy, via e-mail
Dear Cindy: If the proceeds from the savings bonds are used for college education, the taxes are waived if your modified adjusted gross income is less than $73,500 (or $117,750, if filing a joint return). It’s a very good deal for savers. The savings bonds themselves have not been the most efficient vehicle, but that’s water over the dam. At least you will have considerable tax savings since the money is being spent for education.

Dear Bruce: I have become interested in aviation as a new career choice. Here’s the question: Is there any way to recoup any of my flight training expenses? I’m paying a lot of federal taxes, much of which I received back last year on a side business that wasn’t profitable. Any advice on this subject matter would be greatly appreciated. – Douglas, via e-mail
Dear Douglas: There are no tax advantages given to someone training for a new occupation, which is what you are discussing here. If you are a financial adviser and decided to go to school to get a master’s degree in finance, your educational expenses may very well be deductible. If you’re a financial adviser and you’re going to school to be plumber (no connection between the two), there would be no tax help. You didn’t mention your age, but you should be aware that the pilot business is extraordinarily competitive right now because so many highly qualified men and women have been laid off because of cutbacks among the airlines. Your age is a factor because the older you become the less likely it is that you will be hired. Perhaps the best road, if you are physically able, is to consider military pilot training – among the best in the world – where you are paid to learn. Of course, there goes your current occupation since military flying is a full-time occupation.

Bruce Williams is a national radio talk show host and syndicated columnist.
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