Home Equity Loan/ HELOC to pay for higher interest student loan?


#1

Just curious if anyone have done this or recommend doing this.

I notice that some home equity loan interest rate can be much lower than that of student loans, even after refinancing. Is this a smart way to lower the interest rate?

tax benefit of mortgage payment > tax benefit of student loan payments?


#2

Too hard to to say without numbers, both student loan interest deduction and mortgage interest has various phases outs and limitations.


#3

I did this. It dropped my interest rate from 6.4 to 1.9 (intro rate… then up to 2.8 after 12 months) and we were able to write off the interest on HELOC just like mortgage interest. It helped speed up my payoff drastically (paid off right at 29K in just over 2 years). The advantages outweighed the risks for us. I have colleagues (in education) who feel confident they should just make payments because their loans will be forgiven eventually… and I don’t argue with them but truly have a hard time believing that will actually happen. Even if it does, I wanted out and it’s awesome to finally be free of that burden! Good luck!


#4

You’ll have to do some math here, because if you use a HELOC for a non-house related thing, like paying off debts, that the HELOC will not be tax deductible under the new tax law (https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law)

So you’re basically balancing the tax deduction of student loan payments with higher interest rates to the lower interest rates of a HELOC [but no tax deduction].

Overall, the benefits may not be there, since I think HELOC’s have in general lower interest rates than student loans, but not epically lower.


#5

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#6

That is a big saving!


#7

Thanks for the update! You guys rocks!