Posted on 07/18/2012 9:59:44 AM PDT by Kaslin
Dear Dave,
My son is 22 and about to enter the Navy as an officer. He’s been offered a Career Starter Loan. His plan is to invest the money and let it grow while he’s in the service. I’m not sure this is a good idea. What do you think about it?
Mary
Dear Mary,
The Career Starter Loan is just another form of debt, so it’s something I can’t recommend. Basically, it’s the military trying to do a nice thing for its men and women. The problem is that it’s still a loan that has to be repaid. It’s not a signing bonus. In my mind, if you want to help me start my career, kick things off by giving me a job and a paycheck.
Do you know what the number-one cause of security clearance problems is in the military? It’s debt. And financial irresponsibility is the third most prevalent reason for dishonorable discharge from the armed forces. And yet, with this kind of program, they’re shoving debt into young people’s faces right off the bat.
I appreciate the fact that he’s trying to use an academic approach. I’m sure he sees a scenario where he can borrow money with low payments and a really low interest rate, invest it and make a ton of money. The problem is he’s leaving risk out of the equation. What happens if the investments don’t pan out? He could lose the money and still have to repay the loan.
Being older, and having a bit more wisdom, you and I realize things don’t always work out the way they’re planned. In other words, life happens. But don’t be too hard on him. He’s trying to use his intellect, and that’s a good thing. Still, wisdom always trumps academia. And that whisper of wisdom is telling us this situation could be a mess waiting to happen!
—Dave
Dear Dave,
My stepson is about to turn 18. I have reason to believe that his biological father has used his son’s name to open credit accounts. I’ve been told that you can’t do a credit check on a minor, so what’s the easiest way to go about checking this out?
Tom
Dear Tom,
I’m not sure who told you that you can’t do a credit check on a minor. I did it on all my kids when they were younger. There are three national credit reporting bureaus: Experian, Equifax and TransUnion. Just go online to each one, and pull his credit reports to see if anything is showing.
If you find anything, you’ll need to file a police report in the locale where the offense occurred. After you file the report, get a copy and approach the business in question, explaining what happened. You’ll have to make sure they understand this guy is not the kid’s legal, parental guardian, and that he stole his son’s identity to open the account. Then, provide them with a copy of the police report and make sure they take his name off the account.
Checking a credit report is pretty easy, and it will give you a wealth of information. The biggest hassle is making the contacts and explaining things to creditors and the reporting bureaus. But it’s a lot bigger hassle for the identity thief once the companies that have been duped and the authorities know what’s going on!
—Dave
Two of my kids obtained “Career Starter Loans” offered before they got their commission. Both took the money and put the money in very secure investments that offer a greater rate than the loan interest rate! They both correctly figured that they could pull the invested money OUT and pay off the loan if/when needed....or they could pay off the loan over the 5 year period allowed, and improve their credit rating.
So taking the money is extremely low risk and can be a good deal. OTOH - they had friends who used the Starter Loan to buy an expensive car (a depreciating asset!) or to do other things .... Now - if an officer is discharged early (and it can happen if an officer flunks out of a training pipeline - like failing out of flight school or flunking out of Nuc Power School)...then the loan is subject to immediate repayment OR refinancing and standard loan rates (vs. the 1% to 2% loan rate that was offered in 2008 to my kids).
Dave Ramsey ping!
I can’t think of a lower form of pond scum than a person that steals from their children!
Dave Ramsey Fan Ping List.
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I can’t think of a lower form of pond scum than a person that steals from their children!
Dave Ramsey Fan Ping List.
If you would like to be added to the “Live like no one else, so that you can LIVE like no one else” list, feel free to Freepmail me.
Yeah, I was one of the ones who did stupid stuff with his career starter loan. Oh well. It’s paid off and the lesson was learned. “Stupid Tax” is Dave’s term for it, IIRC...
My hubby’s ex shrew emptied all three children’s college funds during the divorce to prop up her “catering business” that folded in a year. Seems you have to WORK to be an entrepeneur which is anthema to her.
She got a nice cushy job as a Child Protective/Foster Parents worker when the biz folded. Hubby pays her $1000 a month in CS (he earns $13 an hour)—all three children are failing school due to her being their “friend” as opposed to parent. Absolute pond scum.
Plus, if they do spend it on something that is not necessary, and fall behind on the payments their credit score will crash. That will impact their security clearance and that could cause them to get dishonorably discharged.
The risk to their life is way to high compared to the small benefit of a few hundred dollars....
I agree. Equally low is the adult child who refuses to work and steals from his terminally ill mom. We got to deal with one of those.
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