Erik Furer started at Seattle University School of Law in 2004 with no debt. He graduated in 2007 with $US200,000 in student loans.
After graduation, he got a job as an assistant city attorney in the Seattle area. He eventually married and had two daughters.
Erik’s father, Hans Furer, says his son wasn’t really thinking about the debt he would graduate with — and how he would pay it off — when he started law school.
“The problem that people at his age have is, they’re really not exactly comprehending and realising what will happen four or five years down the road,” Hans says. “They’re single, they can handle their finances. So it’s basically the typical story of somebody who got married, had kids, bought the little townhouse, and started to realise that he was really financially in trouble.”
Seven years after graduation, Erik was still struggling to make his $US1,700-$US1,800 loan payments every month — he could only manage to pay about $US1,500 at a time.
That’s when his parents decided to help.
Hans and his wife owned a house in Los Angeles, which was valued around $US1.3 million. They bought the house in 1979 at a 12% mortgage rate.
“Over the period of time that we owned the house, we refinanced three times, and the last time we refinanced, we turned the mortgage into a 10-year period,” Hans says. “And we probably paid it off five or six years ago.”
Erik’s younger brother, Peter, had stumbled across a company online called Lenda, which allows people to refinance their homes online, as opposed to going through a bank. He suggested that his parents look into it.
After discussing options with two local banks he and his wife had used before, Hans says he decided to go through Lenda, which eliminates the need for a loan officer, for better interest rates and lower fees — nowhere near the $US10,000 in refinancing fees one bank had quoted him.
The decision to refinance wasn’t an easy one.”The hardest thing was probably making the decision to do it,” Hans says.
The Furers had not paid for either of their children’s undergraduate educations. Instead, Erik and Peter had received scholarships and grants and some help from their grandparents. But Hans and his wife felt it was their responsibility as parents to step in and help Erik, even though he had not asked.
“He was not pushing,” Hans recalls. “He didn’t bring up the idea, but we just felt he’s a dad with two kids working hard. He’s doing the best he can, and as parents that’s what we could do for him, and it was obviously very much appreciated.”
Since their house was already paid off, the Furers refinanced in order to get what’s called a cash-out loan — receiving cash from the equity of their home.
Hans and his wife were able to secure a loan for $US210,000, with a 30-year fixed term at an interest rate of 3.125%. Erik used this loan to pay off his student loan debt, and is now paying the refinance loan back to the bank with a monthly payment of $US899.60 — roughly half of his original monthly payment for his student loans.
In other words, the Furers allowed Eric to borrow against the equity in their home without any fees.
Looking back, Hans admits he and his wife should have spoken up when Erik chose where he wanted to go to law school.
“As parents you always feel that you raise your kids to be able to make important decisions, and what I know now is that Erik could have gone to law school closer to where we are, probably lived at home, and could have probably gone through the process of graduating and passing the BAR with half the debt,” Hans says.
But that doesn’t mean that Hans regrets his decision to refinance. If need be, he says he would do it again.
“Whatever cash is in the house will belong to the kids one day anyway,” Hans says. “So if they get something now instead of when we’re dead, why not?”
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