Compare student loan and mortgage rates to decide which debt to pay off first. See effective after-tax rates and optimal payoff order.
Many homeowners face a common dilemma: should extra money go toward paying off student loans or paying down the mortgage faster? Both debts charge interest, but they differ in tax treatment, interest rates, and financial flexibility.
The key to this decision is comparing the effective after-tax cost of each debt. Mortgage interest is deductible if you itemize (up to $750,000 of debt), and student loan interest is deductible up to $2,500. After accounting for tax deductions, the debt with the higher effective rate should generally be prioritized.
This calculator compares both debts side by side, computing effective after-tax rates and showing you the optimal payoff order. It helps you make a data-driven decision about where your extra dollars create the most value.
Students, parents, and educators all gain valuable perspective from precise student loan vs mortgage data when planning academic paths, managing workloads, or setting realistic performance goals. Return to this calculator each semester or grading period to stay on top of evolving academic targets.
Comparing nominal interest rates is misleading because tax deductions change the effective cost. A 6% student loan with a partial deduction may cost more than a 7% mortgage with full deduction. This calculator handles the math, showing you true after-tax costs so you pay off the right debt first. Real-time results let you test different scenarios instantly, helping you set achievable goals and build an effective plan for academic success.
Effective Student Loan Rate = Nominal Rate × (1 − Marginal Rate) if deduction applies Effective Mortgage Rate = Nominal Rate × (1 − Marginal Rate) if itemizing Prioritize the debt with the higher effective rate
Result: Mortgage first (4.94% effective) vs Student Loan (4.18% effective)
With a 24% marginal rate: mortgage effective rate = 6.5% × (1 − 0.24) = 4.94%. Student loan effective rate = 5.5% × (1 − 0.24) = 4.18%. The mortgage has a higher effective rate, so extra payments should go there first.
When comparing debts, the nominal interest rate is misleading. A 5% student loan and a 6% mortgage seem clearly different, but if you're in the 24% bracket and itemize, the mortgage's effective rate drops to 4.56% while the student loan drops to 3.80%. The mortgage is still higher, but the gap narrows significantly.
Student loans should be prioritized when their effective after-tax rate exceeds the mortgage's. This typically happens when: you don't itemize (student loan deduction is above-the-line, so you still get it), your income phases out the student loan deduction, or your student loan rate is significantly higher than your mortgage rate.
Instead of focusing entirely on one debt, consider splitting extra payments proportionally based on relative rates. This hedges your bets if either rate changes (e.g., variable mortgage) and provides the psychological benefit of seeing both balances decrease.
Generally, pay off the debt with the higher effective after-tax interest rate first. Compare both rates after accounting for any tax deductions. If the rates are close, consider paying off the smaller balance first for the psychological win.
Only if you itemize deductions and your mortgage is $750,000 or less ($375,000 MFS). Since the 2018 tax reform raised the standard deduction, many homeowners no longer itemize, making mortgage interest effectively non-deductible for them.
If you take the standard deduction, your mortgage rate is the full nominal rate (no tax benefit). Your student loan interest may still be deductible as an above-the-line deduction, giving student loans a lower effective rate. In this case, prioritize the mortgage.
Home equity provides financial flexibility through home equity loans or lines of credit, and shelters wealth from some creditors. However, equity earns no return by itself. From a pure interest cost perspective, focus on whichever debt costs more.
If both debts have low effective rates (under 4–5%), investing may yield higher returns over time. Use the student loan vs investing calculator to compare. Many financial advisors suggest paying off high-rate debt first, then investing.
The student loan interest deduction phases out at higher incomes ($75k–$90k single, $155k–$185k MFJ). If your income is above the phase-out, the full student loan rate applies, potentially making it the higher-rate debt to prioritize.