I have both a mortgage and student loans, as many now do. My mortgage is at 5.5 % with ~ $250k balance and my student loans are at ~ $98k with 2.125 % interest. The remaining number of payments are about equivalent (~25 years). So, the question is does it make more sense to pay down the mortgage faster through higher extra payments or get rid of the student loans asap or do a mix of extra payments on both?

Right now I think of my student loans as part of my mortgage, but the total estimated interest paid over the life of the student loans is ~$40k while the cumulative mortgage interest is >$200k. Therefore, wouldn't it make more sense to pay down the mortgage that is also at a higher interest rate, faster?

The way I pay today is a little extra to the student loans and about 1 extra payment per year on the mortgage. As my income changes I adjust the mortgage payment a little higher each year similar to my retirement savings.


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    Did you check this, seems to be the same query. money.stackexchange.com/questions/3938/… – DumbCoder Apr 16 '15 at 15:35
  • Thank you for the comment. Yes, I did read that and think similarly that the higher interest rate is probably the better loan to focus on, but the situation is the exact opposite of that post (with respect to interest rates and balances). I know the math, but am looking for some reasonable arguments one way or the other to judge my own reasoning. Also, the student loans provide some added flexibility that a mortgage doesn't when it comes to hard times (but that is what emergency funds are for, right :)) – CGPhD Apr 16 '15 at 15:49
  • Refinance your mortgage, tomorrow, would be my first bit. 5.5% is a horrifically high interest rate right now. Even bad credit should be in the 4s. – Joe Apr 16 '15 at 20:19

I would pay down the mortgage first. It leaves you with more money in the end. If you focused on the student loans first, you'd have one debt gone, which emotionally is nice, but you'd have accumulated much more interest on the mortgage while you were busy paying down your student loans.

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