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Bad deal

Jennifer has three adult children — all of whom are well-educated and gainfully employed.

She explained how she and her husband paid 25% of all their kids’ post-secondary education, while the remaining 75% was offered as an interest-free loan that must be paid back in full to Jennifer and her husband over the next few years.

Such financial arrangements with college-bound kids are hardly unusual. According to a Savings.com report, 47% of parents with children over the age of 18 claimed to be financially supporting their offspring in some way.

However, the exact arrangement varies depending on each family’s situation and the expectations about repaying any loans.

Jennifer said her daughter paid back the interest-free loan within five years of graduation. Meanwhile, her other son didn’t borrow much, so paying back the loan isn’t a big concern.

However, Jennifer’s middle child borrowed a hefty amount — $57,750, to be exact. She and her son agreed to a repayment schedule of $250 a month. Jennifer later realized that this schedule would cover the loan in 19 years and her son could probably afford to pay the loan back faster because his career is accelerating.

Warshaw called her out on this right away. “You’re trying to spend his money for him,” she told Jennifer.

“You made an agreement and he’s keeping up the agreement,” Delony added, after finding out that the son has never missed a monthly payment. “The bank can’t call you and say, ‘hey, we see you make more money [so] pay us back faster.”

Approximately 25 million consumers have had to lean on family or friends for loans, according to the U.S. Census Bureau data cited by Debt.org. Asking friends or family for financial assistance has become more common in recent years as the prices of education, housing and the general cost of living has risen.

If these deals sour, however, it could strain the relationship irreparably, which is a real risk for Jennifer, according to the Ramsey co-hosts and the comment section on YouTube.

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Online backlash

Many who watched the episode were sympathetic toward Jennifer’s son. “Changing the deal makes you [a] jerk,” one commentator wrote, adding that they had had a similar experience with their parents.

Another commenter described Jennifer as, “a controlling mother who is suffering a situation she created.”

Some went so far as to call her “manipulative” and “meddling.”

Delony, however, struck a more measured tone. He advised Jennifer to temper her expectations because her son is abiding by the terms to which they all agreed upon.

Instead of stewing over how long it’s taking for him to pay her back, Jennifer should try to have an honest dialogue with her son about adjusting their deal and potentially accelerating the payments.

“If you and your husband say ‘we need this money for retirement’ or [you] think that it’s setting a bad example for your son, you sit down and [have] a conversation,” Delony said.

He added that, in theory, Jennifer’s son could be speaking highly of his parents. “You don’t know that he’s not talking to his friends, saying, ‘my mom and dad really set me up for success [and] gave me an interest-free loan to go to school’... [his friends] may think you're the greatest parents ever.”

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Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

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