Puck

He'll only get benefit for interest paid. For example, let's do easy math. Let's say all the interest he earned up until this very day was, say, $600. Then he writes a check for $50,000. If the $50k goes to principle, he doesn't pay interest on that portion of the loan, but he will still get credit for the $600 in interest he paid from January to today. The other option is to pre-pay the loan, which means his payments will be deducted from the credit of $50k, which means that he WILL get the interest (because it will be like he's making payments every month, except that he just wrote one big check. This isn't a savings, however. Believe me, it's FAR better that he pay toward principle than that he continue to pay interest just for a lousy income tax deduction.

He may find that after he makes such a large payment, that he may be a more attractive candidate for consolidation. He can then consolidate at a lower payment. Because that $50k advance on his inheritance isn't going to reduce his payments, just his principle -- except for the fact that he will eliminate one loan entirely, and he will reduce it by that monthly amount. He won't change the monthly payment on the larger loan, though, without refinancing -- he will just owe less money, over a shorter period of time.

As to the inheritance -- that's the weirdest statement I've ever heard. What do you mean by "advance on his inheritance"? That his Dad gave him money that would have come to him when Dad died? -- or that there is already an inheritance in play, perhaps in a trust, and he is taking an advance on that?

Because the issue of gift tax depends greatly on which (or what other) scenario is in play. If Dad is living and he's just giving Son a gift of money, Dad will have to file a gift tax form for any amount over (I think) $11k. This doesn't mean either party OWES taxes -- just that Son's tax-free inheritance amount will be lowered by that much, and if Son's eventual inheritance from Dad is over the estate-tax threshold, Son will owe estate taxes on the overage PLUS the gift tax amount.

But if the advance is on an already settled estate, there shouldn't be a gift tax, but there may be other tax consequences, depending on the settled estate (a trust, an investment, whatever). If it's a settled estate, and he doesn't know the tax consequences, he needs to consult a professional, like the trust administrator.

I wouldn't encourage him to join the military, if you two are not up for being moved around. However, if you are interested in staying put, while he goes all over the country, that could work! Not a lot of people can handle that, though. But I would say if the lousy salaries enlisted men get is an indication of the pitiful kind of money he's making (that he would consider the military a step up?!?!?), then he should perhaps simply find a better job.

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"Wealth is the slave of a wise man. The master of a fool." -- Seneca