Trying to figure this out. I have a student loan $24,000 at 6.55% with Nelnet, and my wife has $48,000 at 5.2% with Mohelo. We have a home worth $220,000 with $40k in equity, and the rest at $180k at 3.9%. Any smart way to get the interest down on the student loans? A HELOC is an option I think, 4% may work. I tried to negotiate with Nelnet for a lower interest but they won't budge. We easily meet the $2k tax deduction between the two of us.

  • You have just under 20% equity. I'm not so sure HELOC is an option. Have you asked a bank? – JTP - Apologise to Monica Aug 8 '12 at 17:04
  • Guess I didnt put in the exact numbers... we payed 20% at closing 5 months ago so a little more than 20%. Have not spoke with the bank. I guess the other option is to contact my wifes student loan company and see if we can consolidate into one – Mike Aug 8 '12 at 21:44
  • Mike - 20% on a 5 month old mortgage means you have a few thousand above 20% at best. mhoran's answer below was on track with some of my other thoughts. – JTP - Apologise to Monica Aug 8 '12 at 22:59
  • On top of that, home values have been declining (though they did seem to bottom out last month) so you may have gone backwards on the loan. You'll have to get the home appraised as of when you apply (the bank will actually do that and will then charge you for it in the loan's closing costs) – KeithS Aug 13 '12 at 19:42

There was another question about using a credit card to lower their student loan payments. There are drawbacks that will also apply in your situation regarding a HELOC or 2nd mortgage:

  • Make sure you understand the interest rate. If it is not fixed you could have made your situation worse.
  • Monthly Payment. The repayment period of the HELOC or 2nd mortgage will greatly influence the monthly payment.
  • Closing costs?
  • There is no going back. If you want to switch back to a student loan you can't.
  • Can you get a get a loan big enough? You need 72K, with only 40K in equity. Gone are the days where the loans could exceed the houses value at the start of the loan.
  • Tax implications?
  • Forgiveness programs. Some employers will forgive parts of the loan, or if you work in public service for X years they forgive some of the loan. They will not view the mortgage debt the same way.
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  • Thanks guys. guess I just better head over to a credit Union and see what they can swing. Just upset that the government is giving banks loans at nearly O and Im at 6.55 for a government style loan. – Mike Aug 9 '12 at 0:54
  • You're an average Joe; one vote in millions. The banks can donate millions to campaigns or superPACs and can thus decide who you can even vote for. Dem or Rep, pretty much anyone on the ballot is beholden to someone besides you for getting them into office. – KeithS Aug 13 '12 at 19:45

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