Skip to main content
No. of Recommendations: 1
I briefly thought about that but decided against it. I'm simply not comfortable with the risk. What if you became unemployed? Student loans can be deferred; HELOCs can't. Even if there was no deferral, I'd much rather default on a student loan than on my house.

I agree. My accountant's been hinting that my wife and I should do that in a couple of years once we build some more home equity / pay down some of the student loan balance. His thinking is that as our income (presumably) grows we would get more of a benefit, tax-planning-wise, since we could write off all the interest on the HELOC whereas our joint income may phase us out of part or all of the student loan interest deduction.

I have resisted this advise for several reasons:

1) the loss of protections and attachment of the home discussed above;

2) my wife would now become a joint debtor on the student loan debt (since the house, and presumably any HELOC, would be in our joint names);

3) our home's value might be re-assessed in the process and we would have to pay higher property taxes (though I admit I'm not knowledgable about the HELOC process compared to a second mortgage and am not sure if this occurs), and;

4) the interest rate on any HELOC would probably be the same, if not higher than, the rate on my student loans.

The only benefit I could see to doing this would be using a HELOC for private-lender loans which are variable-rate. You could lock in a fixed, low rate on those with a HELOC and assure yourself of deductibility of interest. But you would have to forego the protections the loans come with.
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.