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Letter to the editor

Are student loans affecting you?

How have student loans affected your financial life?

By Helen Huntley, Times Personal Finance Editor
Published October 14, 2007

We asked

How have student loans affected your financial life? If you had to do it over, would you borrow the money?

If I had to do it over again, I would not attend a high-priced school. Ivy League schools are great, but too overpriced. I probably would have been better off attending a state college like my colleagues and been in far less debt and in better financial condition than I am now. I became a teacher and had no loan forgiveness. But at 18 we want to reach for the stars at any price and hindsight is always 20/20.

Now I have three children in college and I am refusing to put myself in debt all over again. Let them invest in themselves like I had to do and they will ultimately reap the rewards of their own hard work, not mine. They can attend community college, live at home and commute to college or work and go part-time to college. There are many options available to them so they do not to go into major debt for their education.

My own parents did not borrow on my behalf and they are now comfortable in their retirement years. So I, too, choose to be a bit of a selfish parent now, so that I do not become a burden to my kids in the future.

Tess Jordan, Trinity

You asked

We know we can give $12,000 to each of our children each year without filling out forms and paying gift taxes. My question is about the $1-million lifetime limit. Can we each give $1-million to each of our four children or are we limited to $1-million total for my wife and $1-million for me?

Would you consider adopting me? Seriously, the lifetime gift tax exemption is $1-million for you and $1-million for your wife. Once you cross that threshold, you have to pay gift tax.

As you know, up to $12,000 in gifts each year to each person are tax free and don't count toward your $1-million lifetime limit. There's an exemption for tuition payments made directly to colleges or medical expenses made directly to care providers.

I highly recommend talking with an estate planning lawyer to be sure you won't pay more estate taxes than necessary. The estate tax exclusion is $2-million minus whatever you've used of your $1-million gift tax exemption.

I recall that CD interest rates were at 15 percent in 1980-81. What caused that and what has to happen today to see those rates again?

Runaway inflation. The inflation rate was about 11.8 percent in 1980 and 8.4 percent in 1981. When inflation heats up, the Federal Reserve pushes rates higher to try to bring it under control.

It has been suggested that I convert my 401k to a traditional IRA. Would I be required to take out minimum distributions each year? I am 75.

Yes, you would. You should convert if you want better or more diverse investment options than your former employer's plan offers, or you are worried about the safety of your former employer's plan.

Next week's question

Do you have a tax planning tip? Share your secrets for saving on your income taxes.

To ask a question,make a comment or answer the Money Question of Week, e-mail hhuntley@sptimes.com  or write Helen Huntley, P.O. Box 1121, St. Petersburg, FL 33731. Visit her MoneyTalk blog (blogs.tampabay.com/money) for more money information.

[Last modified October 12, 2007, 19:43:23]