I received an inheritance of 120K. So far I paid off our second mortgage. I also paid off all credit card debt. I have 80K left. This is the biggest payout we will likely ever receive. My husband works full time and earns a modest salary. We aren't low income but we are just scraping by. I am a grad student and not earning any income currently. I am acquiring student loans. I owe 16k in loans currently and will owe about 45K total when finished. I will get a decent job when I am done. My husband and I are 46 and we have 2 kids, ages 11 & 7. I want to get my older son into a private middle school for 2 years. They have a hardy endowment and may offer us a decent need based scholarship if we look worthy on paper. I don't know how inheritance will look to them, and I want to make decisions that will best support getting generous aid from them.

We still owe 238k on our 30 year mortgage. I am tempted to switch to a 15 year mortgage and just try to pay if off as quickly as possible. At the same time, our house is a major fixer. It needs a lot of expensive work to just become an average house. It's not a great place to live and I don't think we can afford anything better in our area. We also want to start a college fund for the kids. We have a modest retirement set up, with husband paying to meet maximum matching.

Should I use the money to pay off student loans and future grad expenses for me? Should I put money into fixing the house or just try to make payemtns to own it outright in 15 years? What would you recommend in light of trying to improve our chances of making 2 years of private middle school attainable for our son? Thanks!

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    One thing you have failed to mention is the interest rates on your outstanding debts. It is very likely that your student loans have a higher rate of interest than your mortgage (unless the loans have government-subsidized rates). The higher the interest rate, the higher the benefit from paying early. – Grade 'Eh' Bacon Aug 28 '17 at 20:00

Should I use the money to pay off student loans and future grad expenses for me?

Yes. The main drawback to student loans is that they cannot be gotten rid of except by paying them off (other than extreme circumstances such as death or complete disability). A mortgage, car loan, or other collateralized loans can be dealt with by selling the underlying collateral. Credit card loans can be discharged in bankruptcy.

Stop borrowing for college, pay for it in cash, then decide what to do with the rest. Make sure you have a comfortable amount saved for emergencies in a completely liquid account (not a retirement account or CDs), and continue to pay off with the rest. You might also consider putting some away for your kids' college, so

I want to get my older son into a private middle school for 2 years. They have a hardy endowment and may offer us a decent need based scholarship if we look worthy on paper

I have a hard time getting behind this plan with a 238K mortgage. If you want to apply for scholarships that's great - but don't finagle your finances to look like you're poor when you have a quarter-million-dollar house. If you want to save some for private school then do that out of what you have. Otherwise either rearrange your priorities so you can afford it or private school might not be in the cards for you.

That said- while it was a blessing to be able to pay off the second mortgage and credit cards, your hesitancy to pay off the student loans makes me wonder if you will start living within your means after the loans are paid off. My concern is that your current spending levels that got you in this much debt in the first place will put you back in debt in the near future, and you won't have another inheritance to help pull you out.

I know that wasn't your question, but I felt like I needed to add that to my answer as well.

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    Keep in mind that a quarter-million-dollar house may be "poor" (speaking in relative terms here) in some areas of the country. For example, Zillow reports the median price of a home in San Francisco is over 1 million dollars. That being said, I still agree with your answer. – airfishey Aug 28 '17 at 21:31
  • Right. We saved to buy an old tear down in an area outside San Francisco. We have always lived within our means, which is much humbler than most other people who live in this county. Our income of 83K is low around here but not extremely so. Ultimately, the advice given is good. It would make the most financial sense to walk out of grad school not saddled with student loan debt. However, I do want to get my son into a better school. Public inter-district transfers is not possible. I worry the timing of this once in a lifetime sum will skew our numbers beyond our reality. – yakers Aug 29 '17 at 3:04
  • airfishey Not criticizing, as yes, poor is a relative term. Regardless, where you live is a want not a need. D. Stanley's point about making yourself look poor on paper to get need based assistance is immoral at best and criminal in cases of federal funds. (Also, While I agree with D. Stanley's assessment of the needs based scholarship, it is an opinion which should go in the comments not as part of the answer.) Lastly, yakers, it appears your paying off debts. Good for you. A useful resource for tackling debt and building wealth is daveramsey.com/baby-steps. – Adam Klump Jan 30 '19 at 5:51

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