When my daughter didn’t go to college even after taking a “gap year,” I used her college fund (still legally my money) to pay off a relative’s student loans. My daughter was furious, and this soon translated into a general anger toward “deadbeats” who don’t want to pay back their student loans.
I pointed out that many people were coerced into student loan debt. She said they should “grow up” and support themselves. This was quite ironic coming from a twentysomething who lives at home rent-free.
To teach her a lesson, I tried to charge her rent. When she didn’t pay, I threatened to kick her out, but she knew I didn’t mean it. I thought maybe she had learned her lesson, but she just now made an angry post regarding the payment pause extension. I’m pretty sure she reads this column, so maybe you could help her to see the problem with her attitude?
You could write a social media post about people who need to grow up and pay rent. I’m kidding, of course.
Here’s what I’ll say to your daughter if she is, in fact, a reader of this column: Your parent cared for you enough to invest for your education. That money was intended for your benefit, but your parent still owned the account, which I’m guessing was a 529 plan.
That money grows tax-free when invested in a college plan. But if you were to use the money for purposes unrelated to education, you or your parent would typically owe taxes and a 10% penalty on whatever money the account earned. By giving that money to a family member to pay off their student loan, your parent preserved the tax advantages.
You don’t have to agree with that decision. But remember: This wasn’t your money to begin with. If you choose to continue your education, you still have plenty of options. It’s always disappointing when we don’t get what we expected. But I’m simply trying to explain the…