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Lawyer Question re: Student Loans
Posted on 10/1/11 at 7:35 pm
Posted on 10/1/11 at 7:35 pm
So I have some student loans. Nothing too terrible but enough where a lower interest rate would make a pretty big difference over the long haul.
Average rate is about 8%. Gotta love when the government takes over something and decides to engage in some thinly-veiled rape in the process. Consolidation would have minimal impact.
Aunt is getting x% interest on some cash. Decides x+1% would be nice and offers to buy my loans, resulting in a lower rate for me and hence a win-win situation for the both of us.
As a lawyer, I'd prefer this agreement to be formalized as opposed to just a handshake agreement. There's no reason for distrust on either side, but this would have certain organizational benefits and I think we should both paper our files.
How would you go about formalizing this arrangement?
Average rate is about 8%. Gotta love when the government takes over something and decides to engage in some thinly-veiled rape in the process. Consolidation would have minimal impact.
Aunt is getting x% interest on some cash. Decides x+1% would be nice and offers to buy my loans, resulting in a lower rate for me and hence a win-win situation for the both of us.
As a lawyer, I'd prefer this agreement to be formalized as opposed to just a handshake agreement. There's no reason for distrust on either side, but this would have certain organizational benefits and I think we should both paper our files.
How would you go about formalizing this arrangement?
3
Posted on 10/1/11 at 7:51 pm to RedStickBR
Just tell her that you would like a contract, and offer to write it. Remind her that unforeseen worst case scenarios can ways happen and that it makes the agreement safer for the both of you.
Posted on 10/2/11 at 4:55 pm to rmc
quote:
Real simple. Promissory note.
This.
Posted on 10/2/11 at 7:49 pm to RedStickBR
Hmm...
I was under the impression that loans had to be given at fair market value.
I.e. your aunt just can't decide what interest rate would be fair to her, it has to be a rate that is competitive or similar to other rates of the same type of loan. Otherwise, you get into ramifications involving part of the loan being considered a "gift" or what not and then you have to deal with limits as far as that is concern.
I'm sure some of it has to deal with how much the loan is. Difference between possibly a few thousand and then a loan of tens of thousands.
I was under the impression that loans had to be given at fair market value.
I.e. your aunt just can't decide what interest rate would be fair to her, it has to be a rate that is competitive or similar to other rates of the same type of loan. Otherwise, you get into ramifications involving part of the loan being considered a "gift" or what not and then you have to deal with limits as far as that is concern.
I'm sure some of it has to deal with how much the loan is. Difference between possibly a few thousand and then a loan of tens of thousands.
Posted on 10/2/11 at 8:11 pm to RedStickBR
quote:
I'd prefer this agreement to be formalized as opposed to just a handshake agreement
Always a good idea, especially where family or friends are concerned.
Posted on 10/2/11 at 10:33 pm to rmc
I think there is s minimum interest rate before the IRS considers it a donation.
Posted on 10/4/11 at 12:41 pm to Athanatos
quote:
I think there is s minimum interest rate before the IRS considers it a donation.
I don't think so, but it's been a while since I took tax law.
Posted on 10/4/11 at 12:47 pm to TortiousTiger
What is the applicable federal rate? This is Jeopardy right?
Posted on 10/4/11 at 12:55 pm to BrandNew
One thing to consider, that hopefully will not play a role, but with death your federal student loans are forgiven
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