How to advise sister who is going into considerable debt

[tsmith321]

Hey everyone, I've got a good one here:

Background:

Wife and I paid off a considerable amount of debt using Dave Ramseys method and are now working toward investing.

My sister is 39 years old.

No retirement savings
No savings
Rent an apartment in Long Island, NY
Has a paid for car, that will need to be replaced soon.
Has been and is currently on welfare
Currently works FT as a diner waitress while going to school FT
**Is a recovering alcoholic who has been sober for over 7 years.  I bring this up because it  may help explain why she received her degrees so late in life, and why she may have no savings.  (Although you do not need to be an alcoholic to be terrible with retirement planning)

Scenario:

My sister recently graduated with a bachelors degree in social work, which the state of NY paid for.  She decided that she didn't like social work; this was decided before she even got a job in social work.

She then decided to pursue a second bachelors degree and masters degree in Acupuncture and Chinese Medicine and will graduate in 2.5 / 3 years.  I have asked her about her loans and she claims that she expect to have around 80-100k in student loan debt.  She believes that she is going to be able to write a "Debt Validation letter" and magically her student loans will be forgiven.  Despite the fact that I told her she needs to have a plan to pay off this debt, she believes that she will cross that bridge she she gets there.  She has also commented about the possibility of starting a business with a few of her classmates, despite not knowing anything about running a business or securing a business loan.

I am trying to preach to her about her decisions and the impact this may have on her future.  My fear is that she wil not be able to pay off her student loans, and she will go crawling for my parents for help.  My parents are retired on a fixed income, and do not have the funds to bankroll my sisters mistakes.

My question to all of you is; What advice should I give my sister? Should I just stay out of it all together, since technically it is none of my business and watch?

My wife and I worked really hard on getting our debt paid off, and it kills us to see anyone make poor decisions like this.

Thanks for your help

Tom

[Jakejake]

Maybe the advice has to go to your parents, not your sister - she seems determined to create her own situation.

Give your parents a heads up about your concerns, make sure they know they aren't responsible for her debts, maybe put the idea in their heads about setting up their will if they have any assets as trust funds for the two of you instead of just a lump sum. Having the conversation with your parents might be enough for your parents to predetermine how they want to handle money requests if and when they come. Sometimes having an agreed upon plan before a crisis works out better than making decisions in the midst of emotional pleas.

I'm not suggesting you tell your parents what to do, more like just letting them know you have a concern, you just want to make sure they aren't blindsided by any of this, and a trust fund might be in your sister's best interest (that comes across more as you looking out for her instead of complaining about her).

Disclaimer - I really don't know much about trust funds, it just seems like a good way to portion out money like regular income, instead of something to be blown through all at once.

[plog]

How did your sister kick booze?  Whatever got her to finally sober up with regard to alcohol, may lead to insight in how to sober her up concerning debt.

The way you wrote your post, it seemed like the situations were very similar--sister doing some damaging things and while she probably realized at some level both were issues she needed to confront, she decided to choose denial.  What made her stop choosing denial in her alcoholism?  Honestly, addicts are strong headed people who often pay lip service to the right thing, but ultimately unwilling to act upon it.  What made her act upon sobriety?

[ltt]

Tell her not to do it.  Other than that, you can't really change someone, only your reaction to them.

[tsmith321]

I have spoken to my parents and their response has been, "we cannot afford to pay for her debt".  It's hard to say what they would do until they see how bad it is going to get.  I can clearly see the writing on the wall in my sisters case.  I feel terrible even saying that, but knowing her personality, I can't see this being anything more than a mess. 

In terms of her alcohol addiction: She is even lucky to be alive with all the damage she has done to her body through the years of alcohol and drug abuse.  I do not think she understands what debt is, because miraculously she escaped her whole life without going into debt.  Granted she hasn't saved more than $1,000 and has no retirement savings, but up until this point no debt.  Now shes throwing herself into the deep end of the pool and she can't swim.

I think it's a good idea to revisit the trust with my parents, I know they have one set up.

I guess for right now your advice would be; she is going to do what she is going to do, and at this point there isn't much I can do for her.

[Dicey]

Your use of the word "preach" is really telling. Don't do it. Walk away and MYOB.

[tsmith321]

Thanks Diane, I believe that is exactly what I will do.

[little_brown_dog]

All you can do is voice your doubts and concerns in a thoughtful, constructive way when she brings up strange ideas or questionable financial moves. Hopefully others will do the same. If she doesn’t ask for advice or bring it up, then you have your answer – she is not seeking your input so don’t bother giving it. At the end of the day she is an adult and can make her own decisions, as painful as it may be to watch. You can only control you, and the amount of time/effort you allow yourself to worry about this.