USAA Career Starter Loan Questions

[TLINAU2230]

Hello folks - generally off-topic to specific academies so I figured I'd ask it here and poll for some wisdom from the crowd.

I'm a USAFA Firstie and have been considering taking out the USAA Career Starter Loan ($36,000 @ 0.75% APR) for two primary reasons. First, I'd like to invest the vast majority in a few different areas (I have received plenty of advice on this from folks here including some great investment classes the academy offers), and second, I was hoping to pay off my fiancée's student loan debt. Basically, she owes around $8,000, which is neither insignificant nor overly vast, but it's sitting at 10% and if it's continued to be paid at the rate she's tackling now it's going to grow by nearly 50%.

On the phone with USAA today I was told the loan cannot be applied to a student loan. I had not heard of that, and I was wondering if any of you have any understanding of why that is, and how they would even be able to tell me the manner in which I apply for the loan (not that I would just go for it if they say I cannot). Finally, I'd love to hear if there is any other general financial investment advice for this situation. Thanks!

 

[A1Janitor]

You apply for the loan and get the check. You then spend it however you want.

 

[Capt MJ]

I think there has been a miscommunication. This is a signature loan given to you in a lump sum. If you want to charter a private jet for a date in NYC and blow the whole amount, you can do that. USAA does not offer direct student loans. You can do whatever you want with the money, as long as you meet the repayment terms of the loan. This is a great opportunity to jumpstart your long-terms savings and give it time to grow for 40 years. That’s the chunk of money you will live in when the salary spigot is turned off and you draw on funds to live on in your 60-79-80-90 years decades.

Now, you seem to have some sensible plans for investing it. Good.

Think about the $8000 AND its potential growth and earnings if you invested it. That is a large gift to someone whom you are not legally united with. That was her choice to take on and her responsibility to pay as an adult. I am not going to get in the middle of your love life, but there is a reason there are a lot of sayings about borrowing and lending money between family and between friends. Nothing can cause resentment faster.

This may sound cold, but it protects you both. Draw up a promissory note - plenty of examples online - signed and witnessed - where you loan her the money to pay off the debt, but she owes you monthly installments of X amount starting a at Y time, maybe a year after her graduation or when she gets a full-time job, at Z interest (you can set that same as you got it or something else lower than student rate). This allows her to responsibly repay debts she has incurred. It allows you to get back some of that money and put it to work for you. And, if you tear the note up on your wedding morning, it’s something that makes sense for your joint finances. If you don’t have a wedding morning, you are protected.

The above is just one of many ways to tackle this. Set emotion aside and think about short, middle and long-term outcomes.

Talk it through with family and trusted advisors. You can also tell people all the two of you really want for a wedding present is cash gifts to pay off her student loan, so you can start your marriage on a better financial footing, something you both really want.

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[Peter2025]

On the phone with USAA today I was told the loan cannot be applied to a student loan. I had not heard of that, and I was wondering if any of you have any understanding of why that is, and how they would even be able to tell me the manner in which I apply for the loan (not that I would just go for it if they say I cannot).

It says on the website that "this loan cannot be used for educational expenses." https://www.usaa.com/inet/wc/career-starter-loan

 

[DTT!FSA!]

The OP is not planning to use it for their own educational expenses. They are planning to gift it to a third party, or to make a loan to said third party. What the third party uses it for is irrelevant.

 

[Capt MJ]

I think there has been a miscommunication. This is a signature loan given to you in a lump sum. If you want to charter a private jet for a date in NYC and blow the whole amount, you can do that. USAA does not offer direct student loans. You can do whatever you want with the money, as long as you meet the repayment terms of the loan. This is a great opportunity to jumpstart your long-terms savings and give it time to grow for 40 years. That’s the chunk of money you will live in when the salary spigot is turned off and you draw on funds to live on in your 60-79-80-90 years decades.

Now, you seem to have some sensible plans for investing it. Good.

Think about the $8000 AND its potential growth and earnings if you invested it. That is a large gift to someone whom you are not legally united with. That was her choice to take on and her responsibility to pay as an adult. I am not going to get in the middle of your love life, but there is a reason there are a lot of sayings about borrowing and lending money between family and between friends. Nothing can cause resentment faster.

This may sound cold, but it protects you both. Draw up a promissory note - plenty of examples online - signed and witnessed - where you loan her the money to pay off the debt, but she owes you monthly installments of X amount starting a at Y time, maybe a year after her graduation or when she gets a full-time job, at Z interest (you can set that same as you got it or something else lower than student rate). This allows her to responsibly repay debts she has incurred. It allows you to get back some of that money and put it to work for you. And, if you tear the note up on your wedding morning, it’s something that makes sense for your joint finances. If you don’t have a wedding morning, you are protected.

The above is just one of many ways to tackle this. Set emotion aside and think about short, middle and long-term outcomes.

Talk it through with family and trusted advisors. You can also tell people all the two of you really want for a wedding present is cash gifts to pay off her student loan, so you can start your marriage on a better financial footing, something you both really want.

---

And, I hope you both don’t get sucked into needless debt for some expensive wedding that the wedding business marketing machine and social media pressure couples these days to think they have to have or they are not doing it right. Shave $8k off of wedding budget and pay off that student loan or at least $4k of it. Cake and champagne after an afternoon wedding but not a sit-down dinner, less of the frills, etc.

 

[TLINAU2230]

Thanks for the advice y'all! I'll see what I can do - definitely not seeking needless debt, just looking to set myself and my future family up as best as I can!

 

[MidCakePa]

And, I hope you both don’t get sucked into needless debt for some expensive wedding that the wedding business marketing machine and social media pressure couples these days to think they have to have or they are not doing it right.

DW and I just celebrated our wedding anniversary. Sent the kids a few photos to remind them of our no-frills event: no giant wedding party (just a best man and maid of honor), no limo (rental car), no band (DJ), no tux (nice suit), no custom dress (elegant off-the-rack dress). Focused on what came next — grad school for me, supported by DW. Our honeymoon took place one year later, and even then we watched the budget. We were munching pizza in Nantucket while others were enjoying lobster.

(Aside: Afterward, several people came to us and said it was the most fun wedding they’d been to in a long time. I’ll attribute that partly to our first dance being a swing to Glen Miller’s “In the Mood.” )

Way too much is spent on one day, when it should be spent on the lifetime ahead. Frugal spending starts now. It doesn’t mean you don’t have fun or spend no money. It means you prioritize wisely.

 

[Capt MJ]

DW and I just celebrated our wedding anniversary. Sent the kids a few photos to remind them of our no-frills event: no giant wedding party (just a best man and maid of honor), no limo (rental car), no band (DJ), no tux (nice suit), no custom dress (elegant off-the-rack dress). Focused on what came next — grad school for me, supported by DW. Our honeymoon took place one year later, and even then we watched the budget. We were munching pizza in Nantucket while others were enjoying lobster.

(Aside: Afterward, several people came to us and said it was the most fun wedding they’d been to in a long time. I’ll attribute that partly to our first dance being a swing to Glen Miller’s “In the Mood.” )

Way too much is spent on one day, when it should be spent on the lifetime ahead. Frugal spending starts now. It doesn’t mean you don’t have fun or spend no money. It means you prioritize wisely.

Hear, hear. DH and I were married in September, in summer whites during an extended port call in St. Thomas, USVI, outside, in a lush cliffside setting overlooking the ocean we both loved, on a beautiful sunny afternoon with a lovely breeze. Found the minister and did paperwork the day before. Our parents were with us. I Space A’ed from Naples, IT, into Philly, then flew commercial to PR and then USVI. DH was there during a pre-deployment work up on a port call with about 6 days of liberty. Squadron and Air Wing buddies showed up with spouses who had flown in. Steel drum band, dancing outside, we treated to open bar for a few hours. No wedding cake or all that other stuff, not my thing. Just people we liked in a lovely place, celebrating. At Christmas, we took leave time with both sets of parents, in GA and PA, who hosted parties/receptions to meet family and friends.

Okay, back from Memory Lane.

 

[LST271]

0.75% APR huh? Man, that's pretty sweet.

 

[HCopter]

Get that promissory note secured against some collateral, properly perfected, and then release it when you are married.