Does this seem like sound advice for paying for college?
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Anonymous
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My dad is a bit of a financial whiz and has advised us to pay off our house first, as opposed to saving for the kids' college. Once the house is paid off, the mortgage money could be used to pay for college.
Does this make sense? |
Anonymous
| What's your mortgage interest rate and how long do you have before the kids start college? |
Anonymous
| How much of a tax break are you getting on your mortgage interest? Mortgage interest is deductible, but student loans are not (go figure). |
Anonymous
3.625% and 14 and 16 years before the kids start college. Loan is for $375k. |
Anonymous
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Can you pay off your house in under 18 years?
Can you get a better rate of return on your money investing it elsewhere? |
Anonymous
| Do you expect to be in the same house through their college? |
Anonymous
Student loan interest is, in fact, deductible. |
Anonymous
Isn't it only deductible at a certain income or less? |
Anonymous
| Tell him to pay for their college so you can enjoy life. |
Anonymous
| OP we're in the process of thinking about this too. One consideration for us is the federal gift tax. If you plan to sock away a lot of that post-mortgage money in a 529 plan, there are annual limits to what you can contribute without triggering the gift tax. We're still thinking about it, but I'm leaning toward paying off the house at a slower pace (i.e., 13-15 years instead of 10), and using some of that $$ to even out our annual 529 contributions in a way that allows us to avoid the gift tax. |
Anonymous
True, and it's low. |
Anonymous
| Pay the house off fast. you can always borrow against it if that is really necessary. If your home is paid for, you hold the cards in oh so many ways. |
Anonymous
+1 Yes. If you have students loans you would know this because your lender sends you a statement at tax time. |
Anonymous
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The question is whether you think you can do better than 3.625% over the next 15 years in a mixed portfolio. I don't think anyone has the answer to that, although a lot of people might say yes.
Another question to consider is whether you think your mortgage payment now will be enough to pay for college in 15 years. I'd probably not do all one or the other. |
Anonymous
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They have their lifetimes left to earn; you don't.
It's best for them to pay their own student loans. |