QUESTION: My brother-in-law is notsatisfied with his current job and wants a college degree. However, hehas a wife (who does not work), two small children and no savings. Heearns approximately $35,000 per year and has about $130,000 in home equity.
Since he feels he cannot earn a degree while working full-timeand being a father, he is considering selling his house and buying amodest home in Idaho or Arizona with cash. He feels he can more easilygo to school and work part-time without the burden of a large mortgage.
Our father-in-law has suggested that he keep his house andtake out a large loan on the equity for $50,000 or $80,000 andrefinance using an adjustable rate or interest-only loan. Which optionwould you recommend? Do you have any other ideas?
ANSWER: Quite frankly, I like yourbrother-in-law's idea of going after a college degree. Investing inone's education will typically provide much greater returns than anyother type of investment. In fact, the vast majority of wealthyindividuals acquired their wealth as a result of their career. Very fewbecame wealthy by simply picking the right stock or parcel of realestate.
Your brother-in-law should think not only of his livingexpenses but also of college tuition fees. If he plans to attend apublic university, tuition tends to be less expensive for residentsthan for nonresidents (or those who recently moved). Moving to anotherstate may save on monthly expenses, but the additional cost ofschooling could wipe out any savings.
