Paying off debt is always a smart goal — but when you’re juggling both a mortgage and student loans, the question becomes: Which should you pay off first?
Should you focus on eliminating student debt to free up cash? Or tackle your mortgage early to reduce long-term interest?
The answer depends on your financial goals, interest rates, tax benefits, and how each loan affects your daily life.
This guide breaks it all down so you can decide which loan to pay off faster — and why.
The case for paying off student loans faster
1. They often have higher interest rates
Federal student loans typically have rates between 4.99% and 7.54%, while private student loans can climb even higher. In comparison, many mortgages issued in recent years carry rates between 3% and 6% — meaning your student loan may cost you more over time.
If your student loan rate is significantly higher than your mortgage, it may be more financially efficient to pay it off first.
2. They may not be tax-deductible long-term
While you can deduct up to $2,500 in student loan interest annually (if your income qualifies), this benefit phases out as your income rises. If you no longer qualify for the deduction, the loan becomes more expensive on a net basis.
3. They can delay other financial goals
Student loans can feel like a weight that holds you back — from saving for retirement to starting a family or launching a business. Paying them off early can offer emotional relief and monthly cash flow freedom.
4. Some loans have fewer protections
If you have private student loans, they typically lack flexible repayment plans, forgiveness options, or federal protections. That makes them riskier — and more urgent to eliminate.
The case for paying off your mortgage faster
1. You’ll save thousands in interest
A mortgage is often the largest debt you’ll ever take on. Paying it off early — even just a few years ahead of schedule — can save you tens of thousands of dollars in interest over the life of the loan.
Example: Paying $200 extra each month on a 30-year mortgage could shorten the loan term by several years.
2. You’ll own your home outright
There’s a powerful sense of security in owning your home free and clear. Once the mortgage is gone, so is one of your biggest monthly expenses — which can be life-changing in retirement or during job transitions.
3. It reduces risk in uncertain times
In tough economic periods, having a paid-off home means you have a place to live — no matter what. It also gives you leverage if you need to downsize, refinance, or borrow against your home.
4. Less debt = better mental health
Many homeowners feel peace of mind knowing they owe nothing on their house. If debt keeps you up at night, paying off the mortgage might offer more than just financial return — it may boost your emotional well-being too.
Key factors to consider before deciding
1. Compare interest rates
If your student loan rate is higher than your mortgage rate, it’s generally smarter to pay the student loan first. Focus on the debt costing you more.
2. Assess tax benefits
- Mortgage interest is tax-deductible for many borrowers (if you itemize deductions).
- Student loan interest is deductible for some — but with stricter income limits.
If tax deductions are important to you, calculate how much you’re saving annually before deciding.
3. Look at loan forgiveness options
Do you qualify for Public Service Loan Forgiveness (PSLF) or income-driven repayment forgiveness? If yes, it may be better to pay the minimum on student loans and redirect extra funds toward your mortgage or savings.
4. Consider liquidity and flexibility
Paying off your mortgage locks your money into an illiquid asset (your home). If you’re young and still building emergency savings, retirement funds, or investments, it may be better to:
- Make minimum mortgage payments
- Pay down student loans
- And invest the difference for better returns
Best of both worlds: a hybrid approach
You don’t necessarily have to choose just one. A balanced strategy might look like:
- Paying the minimum on your mortgage
- Making extra payments toward your highest-interest student loan
- Once student loans are gone, redirecting those payments to your mortgage
This way, you reduce interest on your costlier loan while still progressing on both fronts.
Another option: Use windfalls (bonuses, tax refunds, side hustle income) for lump-sum extra payments to either debt — without overcommitting your monthly budget.
Think beyond the math
When choosing between paying off a mortgage or student loans faster, it’s not just about numbers. It’s about goals, lifestyle, stress levels, and your overall financial picture.
Ask yourself:
- Which loan feels more burdensome right now?
- How stable is your job and income?
- Are you sacrificing investments or savings to pay off debt?
- Would paying off one debt free up money for other goals?
Whatever you choose, there’s no wrong answer — as long as you’re being intentional. Focus on what brings the most long-term value, peace of mind, and freedom for you.