Ask Terry Questions Student loans or distribute inheritance

Student loans or distribute inheritance

By Terry Savage on January 14, 2019 | College Savings / Student Loans

Friend has a TSP account from his deceased wife and the money is designated for their sons college. Discussion- cash out and pay the college bills? Or take out student loans and pay before loans are due

Terry Says

If this amount was designated by his late wife, he should honor her wishes. I’m assuming that the widower is the beneficiary of the plan. If it has already been converted into an “inherited” plan, there may be some advantage to spreading out the withdrawals, depending on his tax situation. He should consult an accountant about that issue. But if he is investing conservatively, he is unlikely to earn more than the cost of student loans once they start accruing interest. So when he presents a check — to the college or university, not to the children — he should remind them that this was their mother’s hard work — and they should honor her memory by doing well in school.

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