How Grown-Up Are You Going to Be?

Elizabeth has $50,000 in a trust. Her father thinks it should be 100% for a down payment on a home. She thinks it makes more sense to pay down the student loan debt. Who's right?

QUESTION: Elizabeth in Cincinnati has $50,000 in a trust. The money came from her grandmother, and it’s controlled by Elizabeth’s attorney father. Her father thinks it should be 100% for a down payment on a home. Elizabeth has $10,000 in student loan debt and just got married. She thinks it makes more sense to pay down the student loan debt. Who’s right?

ANSWER: What would be wrong with paying off the student loan and putting $40,000 toward the house? Your dad’s wrong. He’s just flat out wrong. You should be debt-free before you move into a property because if you don’t, Murphy will move into your spare bedroom and bring his three cousins—Broke, Desperate, and Stupid—with him.

The other thing is I wouldn’t buy a house the first year of marriage. You’ve got a year.

I’m not sure you’re going to be able to buy a home in L.A., depending on what your incomes are after your husband graduates. The bottom line is, you would not borrow money on a student loan to make a down payment on a home increase, and effectively, by not paying off the student loan, that’s what you’re doing.

Your dad is wrong. You should clear the student loan first. I don’t think you need to worry about any of it for a year. I think you guys just pile up cash and do your own thing, and if he doesn’t want to release the money to pay off the student loan, then he doesn’t release it, I guess. He’s the trustee, but he’s wrong.

The only way that I suggest this whole thing, though, is not that you pay off your student loan so you can go spend extra money and waste money. The idea of putting all of the money into a house is at least the money’s trapped in there, and you can’t go blow it. The only way that he’s wrong is if you two are going to be grownups. You’re going to live on less than you make, and you’re not going to use the fact that the student loan is gone as a reason to consume more, and instead, you’re going to use that as methodology to build up even more of a down payment. The remaining $40,000 just supplements it. The reason I’m firmly stating that he’s wrong is based on you guys living a plan that is logical and mature—not based on you just going and blowing money. If he’s looking at you and saying you’ve been irresponsible and as long as you’re irresponsible, there’s no way he’s releasing this except for a down payment and that way you can’t screw it up, I would agree with him on that. But if you’re going to be responsible and live a plan that includes becoming debt-free before you buy a house and you’re living on a budget, and the two of you have goals very clearly set out and you’re living on less than you make, overall, we’ve got a system here. Then yeah, in that case, he would be wrong. That depends on where you and your husband are in this process as a young married couple. How grown-up are you going to be?