Student loan vs. home equity

**dczech09** · 06-06-2011, 05:22 PM

Personally I would never consider such a thing. First of all, you have to consider that you would be exchanging an unsecured loan for a secured loan. In other words, you would be taking $9,000 of unsecured debt and making it secured with your house as the collateral. So if you default, they can take your house; if you default right now, your creditors will just have to squeal for a little bit.

Second of all, if you open a home equity line of credit (HELOC), then you run the risk of opening a line of credit that you might be tempted to utilize in the future. If I were you, I would keep the debts the same and just attack that $9,000 loan with a vengence.

As far as your student debt; I know $40,000 seems like a lot but it really isnt when you compare other people. What is your major? What do you do for a living now? Please tell me that you have a job doing something other than underwater basket weaving.

When I graduated from college, I had over $45,000 in debt total. Fast foward two years and I am down to about $26,000. Please note that this also takes into consideration that I spent my first 6 months making almost no money. Also I travel between MN and WI constantly which eats up my gas. I spend about $150 on gas in one week (and thats a good week). I am just pointing this out to illustrate that no matter your situation, you can make it work and get yourself out of debt.

**disneysteve** · 06-06-2011, 05:57 PM

You should absolutely NOT borrow against your home to pay off student loans for the reasons dczech mentioned. 40K is not bad at all. Hunker down. Live as frugally as possible and pay off those loans as fast as you can. How much are you earning?

**questionsss** · 06-07-2011, 04:57 AM

appreciated

That is the advice i was looking for and thank you very much.

I am a teacher and make in the 60's.

my worries are that now that the grad loan repayment is kicking in, the minimum payment between the 3 loans is going to be around $800/mo.

guess it will just take a while?

**disneysteve** · 06-07-2011, 05:03 AM

Originally posted by questionsss View Post

I am a teacher and make in the 60's.

my worries are that now that the grad loan repayment is kicking in, the minimum payment between the 3 loans is going to be around $800/mo.

guess it will just take a while?

It will take some time to pay off 40K in debt, but you can shorten that time quite a bit if you work at it. Keep your expenses as low as possible. Nothing but limited basic cable if any. No fancy phone plans and features. Cook meals at home and avoid dining out as much as possible. Wear the clothes you already own - stay out of the malls. Don't do any recreational shopping and browsing. Agree with family and friends to not exchange gifts for the next couple of years, or set a very modest cost limit on gifts, like $10/person. Do all of the things that we all have done and continue to do to live below our means.

With an income of over 60K, you should certainly be able to get rid of this in no more than 5 years and probably less than that.

**questionsss** · 06-07-2011, 05:45 AM

Thanks Steve!
I really appreciate the advice.

**disneysteve** · 06-07-2011, 06:51 AM

Having paid off over $100,000 of student loans myself, I'm quite familiar with the process.

**questionsss** · 06-07-2011, 09:24 AM

how about this?

i refinanced my house over a year ago to a 15 year loan at fixed 4.375% - balance of about 165000.
should i consider refinancing back to a 30 and put that money towards the school loans?

**disneysteve** · 06-07-2011, 09:35 AM

Originally posted by questionsss View Post

how about this?

i refinanced my house over a year ago to a 15 year loan at fixed 4.375% - balance of about 165000.
should i consider refinancing back to a 30 and put that money towards the school loans?

NO! For the same reasons already stated, you should not convert unsecured debt to secured debt. Stop looking for a way to borrow your way out of debt. It can't be done. Instead, look for ways to cut your spending and free up money to direct toward repaying these loans as quickly as possible.

**Frugal** · 06-19-2011, 10:28 AM

Personally (in my own opinion, I am not a professional) I would never take out a home equity line of credit. I worked at an insurance company once, and I can tell you these do not usually to my knowledge reflect well on a credit score, or a person's overall creditworthiness picture in general. I was taught that these were "bad", and taken out only as an emergency measure (similar to a second mortgage, like quite a few people that I had to handle had). I am not an expert, but I would only take out one as a last resort...

Oh, and by the way, I am in the same boat as you trying to pay off student loans, just not quite as much since i didn't (and couldn't afford - lol) graduate school. Aren't they a pain? Ugh. Still, be encouraged. I was able to pay off some even when I was laid off, by cutting back and slowing down my unnecessary expenses. I recently met a small personal goal of paying off my loan down to a certain point, below which I feel much better about it. Set smaller goals that are attainable, like paying off say $1,000 in a year, or six months, if that is all you can realistically do. Even if that goal is, say, only to pay down $200 or $300 over a certain period of weeks or months. You will find it bolsters your confidence in your ability to pay them off, when you meet your goals and see that big ugly number of total amount owed going down. To me, it was a small personal victory just to see that number drop down to where I had been aiming to get it for 3-4 months!!

Student loan vs. home equity