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When Sarah went to college, she assumed the 529 plan her parents had prepared for her was an act of generosity.
But almost two years after finishing graduate school, he discovered that what he thought was a gift came with strings attached. In his call to The Ramsey ShowSarah says her parents are now seeking a refund of $114,000 in this 529(1) plan.
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To make things even more awkward, Sarah’s father, who happens to be a lawyer, brought up a promissory note she signed years ago that reads, “I promise to pay my parents all amounts paid to me for my secondary education, including, but not limited to, tuition, housing, and living expenses.”
Sarah told co-hosts Jade Warshaw and George Kamel that the $114,000 was the entire 529 plan balance, not the amount her parents contributed before compounding. After hearing Sarah’s story, Warshaw didn’t mince words.
“This is diabolical,” she said, while Kamel suggested she let her father take her to court, adding, “I think it would be a fun way to end the relationship with his daughter.”
“I don’t think this will ever hold up in court.”
As Sarah explained on the show, she now fears this new lawsuit will turn into legal action and asked the co-hosts what’s the best way to communicate with her parents without seeming ungrateful.
Warshaw advised Sarah to simply be honest and say: “There is no part of me that understood that I would be paying this money back. If I had, I wouldn’t have signed this. And I feel very shocked by this… and I would like to ask if this can be forgiven.”
Later, Sarah asked what to do if her parents aren’t so forgiving.
Kamel responded, “I don’t think this would ever hold up in court” if his parents actually requested the full balance of $114,000 instead of just the amount they originally put into the 529 plan. He also suggested working with an attorney to determine whether the phrase “all amounts paid” means the final balance of the 529 plan.
But whatever happens with the payout of this 529 plan, Warshaw and Kamel agreed that Sarah’s relationship with her parents simply became a “transaction.” Future Thanksgivings are sure to be much more tense, if it happens at all.
Read more: Robert Kiyosaki warned of a “greater depression,” in which millions of Americans will become poorer. Was he right?
The crushing weight of student debt
Although financing student loans may not be as strange as Sarah’s situation, it is a common source of frustration. Student debt is now the second largest form of household debt after mortgages, totaling $1.66 trillion according to the Federal Reserve Bank of New York’s Q4 2025 report (2).
That figure isn’t too surprising considering the rising cost of college tuition. When adjusted for inflation, the Education Data Initiative found that public college costs skyrocketed 312.4% between 1963 and 2025 (3).
The Education Data Initiative also estimates that the average student debt burden now stands at approximately $43,333, including federal and private loan debt (4). For many graduates, these monthly payments can prevent them from reaching important milestones in their lives.
In fact, a Gallup poll found that 71% of student loan borrowers are postponing at least one major life event. This includes 29% who postpone purchasing a home, 15% who delay having children, and 13% who postpone marriage (5).
With such a high price tag, it’s understandable why more and more Americans are skeptical about a college education. An NBC survey recently found that only 33% of respondents said a four-year college degree is “worth it” for the higher lifetime income it offers (6).
But there are tools families could use to make debt less of a problem for their children, especially if they plan ahead.
One strategy is to open a 529 College Savings Plan, like in Sarah’s case. These accounts allow money to grow tax-free when used for qualified educational expenses.
The Education Initiative estimates that 16 million American families already use 529 plans to help finance college, but also states that 54% of parents do not know how 529 plans work or what benefits they offer (7).
Another way to save for college is known as a “Parent PLUS loan,” which parents take out to fill gaps after financial aid. Just keep in mind that these loans have higher interest rates and are the sole legal responsibility of the parents. Since the debt cannot be transferred to the student and there is less repayment flexibility, these loans carry greater risks for parents.
Families can also help by donating money directly, but it is essential to distinguish between donations and loans. A donation has no expectation of repayment and may be subject to tax reporting rules if a donation exceeds IRS annual limits. In contrast, a family loan should include a clearly understood written agreement, complete with repayment terms to avoid future financial or legal complications.
As Sarah’s case highlights, not understanding whether financial aid is a gift or a loan can cause extreme emotional stress.
What to do if you have debt
For many younger Americans, student loans are the largest financial burden on record. The average federal borrower owes about $39,547, and that figure can increase to about $43,333 when private loans are taken into account, according to the Education Data Initiative (8).
But student debt isn’t the only pressure point. Credit card balances have also skyrocketed, reaching a record $1.28 trillion by the end of 2025 (2), a sign that more households are borrowing just to survive. When this is added to student debt, this suggests that many Americans are struggling.
If your bills are piling up and minimum payments are becoming more difficult to manage, it might be time to rethink your strategy.
For example, consolidating all your debts into one personal loan through Credible is an effective way to get rid of your debt faster. Instead of juggling multiple monthly payments, you’ll have one predictable payment to manage each month.
Through Credible’s online marketplace, finding the right loan is much easier. Credible lets you shop around for the lowest interest rates with just a few clicks.
In less than three minutes you will see all the lenders willing to help you pay your credit cards or other debts with a single personal loan.
If you owe a substantial amount, you may also want to see if you qualify for a debt relief program to help you pay off a significant portion of your debt.
With Freedom Debt Relief, you can speak to a certified debt relief consultant for free, who can show you how much you can save by partnering with them.
If you are eligible, they can negotiate agreements with your creditors until all of your recorded debt is resolved.
Don’t Let College Costs Create a Conflict
Misaligned expectations can have catastrophic consequences for funding higher education.
It’s understandable why Sarah assumed her parents’ support was an act of generosity, but apparently that’s not how they saw it. Everyone just assumed they were “on the same page,” but those assumptions fell apart when Sarah realized her parents expected her to pay them back.
To avoid this situation, discuss expectations and make sure everyone involved understands their obligations. First, clearly state whether the money is a gift or a loan. If the latter, what are the payment terms and deadlines and what happens if circumstances change?
Families should also consider whether there are any stipulations associated with this financial aid, such as minimum grades or college work expectations.
If possible, it is best to frame these conversations around shared goals and transparency rather than control. In fact, a key issue that Warshaw pointed out in Sarah’s call was the imbalance of knowledge between Sarah and her father.
As Warshaw told Sarah: “I feel like there’s a balance of power here, I’m going to say knowledge and power. And I feel like, I’m not saying that (your father) intended to do it, but it seems like he may have taken advantage of that, whether intentionally or by accident.”
Before having someone sign a document, take enough time to read the fine print and understand all the legal and credit implications. Signing on the dotted line for a student loan creates binding obligations that, if not properly understood, could be breeding grounds for unintentional resentment.
— With files Eric Esposito
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Article sources
We rely only on verified sources and credible third-party reports. For more details, see our Ethics and editorial guidelines..
Ramsey Show Highlights (1); Federal Reserve Bank of New York (2); Educational Data Initiative (3,4,7); Gallup (5); NBC News (6); Education data (8)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
