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My Family Member Loaned Me $120,000 — & Things Got Messy

Welcome to Taking Stock, a space where we can take a deep breath and try to figure out what the COVID-19 economy really means for our finances. Every month, personal finance expert Paco de Leon will answer your most difficult, emotionally charged questions about money. This last two years have forced many of us to reprioritize our finances, and there’s no clear road map for getting through the pandemic yet — but Taking Stock is here to help us figure it out together.
Last time, we spoke with a reader who took out a loan to buy a car, then tried to refinance that loan after almost two years of dealing with a 14% interest rate. This week, we heard from Refinery29 readers about their own personal loan stories (both good and bad) and how they've handled them.
Alison, 24 — Massachusetts
Alison got into her dream school — but she didn't realize she'd have to take out loans until she was already there. "My parents broke the news to me that they hadn’t put away enough into my 529 account to pay for my degree, so each year of my four years of undergrad I took out a loan of around $25,000 to pay for part of tuition," she says. She was able to refinance those four loans into one lump sum after she graduated graduated to get a lower interest rate.
"Having to put a very large piece of my monthly income — literally 35% goes towards my loan payment — has caused me stress and anxiety and feeling like I have to sacrifice some fun things in life and stick to a strict budget in order to make those payments," she says. "Often times before saying yes to trips, dinners out, or other social invitations, I have to consider my monthly budget. I keep my loans on auto payment and as soon as my weekly paycheck comes in, automatically a portion goes into a separate account that my loan payments pull from, so I don’t even see it happen, but what I’m left with is a much smaller chunk of change to work with for the rest of the week and the rest of the month."
"My only regret is not learning about the significance of student loans and specifically the significance of the interest rates when I was being told to take them out by my parents," she says. So far, Alison has put in around $8,000 with $111,000 left of her loan to pay off.
Jennifer, 28 — Colorado
Jennifer took out a loan for $50,000 for her car, a Toyota Tacoma, one year ago. So far, she's paid off $15,000 and has $35,000 left to go. "I run a real estate business, I travel to numerous properties all over the country frequently on bad roads," she says. "So, I really needed a truck that could handle anything."
At first, Jennifer was nervous. "I had never taken out a car loan before, so I didn't really know what to expect," she says. "But, luckily, everything went smoothly and I was able to get the truck I wanted."
"I do not have any regrets about my loan," she says. "It has helped me purchase a car that I needed, and I am able to make payments without any issues." At this rate, Jennifer will be able to pay off her loan by 2025.
Jasmine, 27 — Texas
Jasmine borrowed $120,000 from her aunt to help run her business. The money went towards doing trade shows, creating samples, and running social media ads. While she doesn't regret the transaction, she wishes they had decided on the terms together and had it settled before the money was transferred. "We didn't get it in writing. Dumb, right?" she says. "You have no idea. We both had completely different ideas of the loan terms, and it got messy."
Now, Jasmine is paying her aunt back $5,000 each month until the holiday season, then $10,000 per month after that. Her aunt will also be receiving 10% of revenue from trade shows until the entirety of the loan is paid off.
Jasmins says that the $120,000 didn't necessarily pay off for her business, mainly because she had given birth to her first child during the time. "Having a baby really delayed things because we hadn’t found reliable childcare, so we probably did 25% of what we wanted to get done," she says. "It should’ve been worth it but it wasn’t."
Monica, 44 — New York
Monica has almost $70,000 left to pay back on her student loans and $15,000 on a personal loan. "It was way too easy for me to get my student loans," she says. "I got approved for so much money and had no education on how to pay them back. I went into teaching and was never able to qualify for the teacher forgiveness because of the small print."
"If I had known I wouldn't qualify for the teacher loan forgiveness, I would have never taken out the maximum amount," Monica continues. "I have really struggled with how much debt I took out to become a teacher. It's hard to teach for 15 years and know that my debt is a year of my salary."
Having these loans has also affected her mental health. "Sometimes I get super depressed about them," she says. "I also am BRCA1 and had a pretty significant health scare this year after losing my sister to metastatic breast cancer when she was 29 years old. My loans kept me teaching when the best care for my health — physical and mental — would have been to take a break. I finally decided that being in debt was better than working as a teacher given my mental health, so I am focusing on building up my online business."
Aracelis, 37 Washington
Aracelis had $137,000 in student loans and paid them off in full in March 2021. "After college, I jumped into getting my master’s at the same university, however my salary was not enough to cover the tuition," she says. "I had to take out additional loans and thought I would be making a simple payment every month, almost like a car payment, as my friend described to me. I ended up graduating with a combined $80,000 in loans."
For ten years, Aracelis paid $500 per month toward her loans and hadn't made a large dent. "I later enrolled in a two-year executive MBA program abroad, with a partial scholarship. I went through the same process with FAFSA, but before starting my second year, they stopped offering loans for international programs," she says. "So, I took out loans through Sallie Mae for my final year, and graduated from my program with a total of $137,000 in loans."
After she completed her MBA, Aracelis had the option to refinance her student loans with SoFi due to her new job's benefits. "I refinanced with SoFi, my monthly loan payments automatically came out of my paycheck, and the interest rate decreased from 3.5% to 0.5%," she says. "Through some lifestyle changes and extra income streams, including bartending and retail, I was able to go from a 30-year loan to a seven-year track, and I paid it off in two years and four months!"
"I am from Venezuela, and because of my country’s hyperinflation issues, my family was not able to save money as easily as you could in America at the time. I was never taught about financial wellness," she says. "I knew I wanted to pay my loans off, and fast, so I made some changes to my lifestyle that would benefit me financially: I live in an affordable studio apartment, worked extra jobs on the weekends and put all of that extra revenue toward my loans each month."
"What helped me was owning my truth and letting people know that I had to budget. The problem is, we don’t talk about money," she says. "I was very, very vocal. I wanted my friends and family to know about my student loan debt. For any holiday, when they asked what they could get me for a gift, I let them know that I wanted money to help me pay my student loans. When they gave me cash, I put it toward the loan payment and I sent them a screenshot of the receipt!"
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