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.
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.