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Ask Dave

Boarding School Budget Buster

Ann and her husband are considering re-mortgaging their house to pay for their son's boarding school. Dave doesn't like the cost of this boarding school and has some tough words for Ann.

QUESTION: Ann in Dallas and her husband are considering re-mortgaging their house in order to get a lower payment on their bills. Their son is in a boarding school, and Ann is a teacher and currently unemployed. Her husband makes about $70,000 a year plus bonuses. They currently have no mortgage. Dave doesn’t like the cost of this boarding school and has some tough words for Ann.

ANSWER: It’s $30,000 a year, and you make $70,000. That’s how you made an unwise decision—you made it real quickly. You guys are willing to live in a one-bedroom apartment to do this because you cannot afford a $30,000 on a $70,000 income and keep a house and keep anything. I don’t disagree that saving your son was important. I disagree on how you saved him.

Here’s the problem. I’m not saying that you shouldn’t help your son. I’m not saying that your kid doesn’t come first. I’m saying that you can’t bankrupt your family in the process of helping your son. That’s what I’m saying. Mathematically, if you sit down and do your budget, you cannot write a $2,400-a-month check, and you sure can’t write a $2,400-a-month check and a mortgage check. If you don’t get a job, your house has to go up for sale when he goes back to school in the fall. You don’t seem to be connecting to this reality when I’m talking to you. I’m not trying to be hard on you, but I’m trying to make sure I pierce through all of this emotion and all of these problems in this extremely stressful situation you guys have been facing and to also not let you make another financial mistake. I’m trying to pierce through without being unkind to you, but I don’t have the sense I’m doing that.

Let’s do a little bit of math. If you go borrow $50,000 on your home to finish this year out and to pay off the credit card debt, I do not want that to be a form of financial denial. By August, if this kid is going back to school, you are saying out loud that him going back to school is costing you your home and you’re going to have to sell it. You do not have the money for him to go to school next year.

I think paying your mother back for helping with this is awesome. I have no trouble with that. That does not change the equation that if he gets ready to go back to school next year and your household income is $70,000, your house is for sale. You cannot afford a second year of this school. You need to find another alternative or be willing to sell your home. Mathematically, it’s not working. All you’re doing is putting off the decision. If you go borrow $50,000 on this house, do it at the credit union—no closing costs, no prepayment penalty, and put it on as short a term as you possibly can. Be committed to the idea that you cannot pay this house payment and send him to school with just your husband working next fall. There is an end to this. It’s bankruptcy if you don’t change the direction of it. You can patch it up one time for one year’s worth of crisis, but you can’t keep on this track because it’s a track that’s going to lead you to bankruptcy court.

Thank you! Your guide is on its way! 

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