Student Loan vs Mortgage Calculator

About the Student Loan vs Mortgage Calculator

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.

When This Page Helps

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.

How to Use the Inputs

1. Enter your student loan balance and interest rate.
2. Enter your mortgage balance and interest rate.
3. Enter your marginal federal tax rate.
4. Indicate whether you itemize (for mortgage deduction) and claim the student loan deduction.
5. Compare the effective after-tax rates.
6. See which debt to prioritize for extra payments.

Example Calculation

Tips & Best Practices

• Compare after-tax rates, not nominal rates — tax deductions change the math significantly.
• If you take the standard deduction, your mortgage interest isn't deductible (only the student loan deduction is above-the-line).
• Refinancing either debt to a lower rate can flip the priority order.
• Student loans have no prepayment penalty; check your mortgage for prepayment clauses.
• Consider the psychological benefit of eliminating the smaller balance first.
• Don't neglect retirement savings — capture your employer match before accelerating either debt.

The After-Tax Rate Is Everything

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.

When Student Loans Should Come First

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.

The Hybrid Approach

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.

Frequently Asked Questions

• Should I pay off my student loan or mortgage first?

  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.

• Is mortgage interest always deductible?

  Only if you itemize deductions and your mortgage is $750,000 or less ($375,000 MFS). Since the standard deduction is now larger, many homeowners no longer itemize, making mortgage interest effectively non-deductible for them.

• What if I don't itemize?

  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.

• Does building home equity matter?

  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.

• What about investing instead of paying off either?

  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.

• How does the income phase-out affect the comparison?

  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.