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Question for the Money Doctors

Question submitted on Aug 10, 2011.


My daughter is getting ready to graduate from Purdue in Dec 2011 I am wondering the best way to reduce the student loan from 6.8% to a lower rate. As parents, we are willing to use our credit rating and willingess to take on the debt to start making payments to repay the debt. We, both mom and dad have an annuity set aside at age 59/12 to help pay this college debt. We are 55 and 57 years old. How can I use this money to pay back her college loan to the best advantage?

Thanks, Patty Blackburn


If your annuities are indeed set aside to service the student loan debt and you have sufficient retirement assets, you could consider taking out a loan in your name at a lower interest rate then using the proceeds from your annuity payments to service the debt once you reach 59 1/2.

Although I like to stay away from encumbering the personal residence to pay for eduction, one option would be to take out a home equity loan to significantly reduce the balance on the student loan. You would then need to make monthly payments on this equity line from your current cash flow until you are able to annuitize your contracts.

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