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home equity loan to pay off student loans?

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  • home equity loan to pay off student loans?

    I think I am in the boat most residents nearing completion of training are in that I am hoping to pay off debts as quickly as possible.  I am relatively new to personal finance, but had an interesting discussion with a CPA.  They told me that home equity loans are tax deductible.  I have a relatively cheap house I am going to stay in for quite some time (180k), and have 210k loans at 6.8% from training.  Would it be possible to pay off my house with the bulk of new attending income over the next few years, then take out a home equity loan against the house and use it as a deduction?

  • #2
    Why not just refinance the student loans to a lower rate, and pay off the student loans over the next few years and be done with them?

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    • #3
      While that can be a good strategy, only the interest on up to $100,000 of a Home Equity Line of Credit (HELOC) is income tax-deductible.

      I agree that you should likely just refinance privately to lower your interest rate. If you are going to pay your loans off quickly, you might even want to use a variable rate.

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      • #4
        As Larry said, HELOC interest deductibility (if the HELOC is not used to purchase a home) is limited to $100k of debt. I can think of no good reason to keep a 6.8% nondeductible loan for the next few years while you pay off your deductible, lower rate home mortgage. Refi and pay off your student loans with the bulk of your new attending income over the next few years.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Don't trade debt for debt if you can help it.  $210,000 at 6.8% is pretty average for docs.

          Are you currently in RePAYE to subsidize half of the unpaid interest each month?

          Once you've got attending income you should be able to refi it down to the 3% range and pay it off in less than 5 years, as recommended by the professionals above.

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          • #6




            Don’t trade debt for debt if you can help it.  $210,000 at 6.8% is pretty average for docs.

            Are you currently in RePAYE to subsidize half of the unpaid interest each month?

            Once you’ve got attending income you should be able to refi it down to the 3% range and pay it off in less than 5 years, as recommended by the professionals above.
            Click to expand...


            I dont think there is anything wrong with trading bad debt (as far as tax, rights, etc...go) for better debt, but agree that there is no reason to do so just because. This plan involves some frictions and things that are probably easier with a refi, but in general, Id rather have heloc debt than student debt.

            Id trade debt for debt all day long, as thats really what refinancing is anyway, if it was a better overall deal every time. There was that one bank extending personal loans for your student loans for long term relationships, that was a great deal if you lived in the right place.

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