75k Cash: Pay off student loans or use for a mortgage downpayment

[Arthur Means]

Hey all,

New here.  I am hoping some of you can help provide clarity to my situation.  

I currently own two homes.  One is a rental with about 40K in equity.  The other is our residence with 75K equity.  I am in my early 30s.  My wife has about 75K in student debt.  My question is simple...  If we sell our primary house, is it better to pay off the student debt or put a nice downpayment on the next house?

I have been leaning towards paying off the student debt, primarily for tax purposes.  The student debt only lets me write off a very small amount of interest but the house would let me write off basically all interest.  Also, paying the student debt would free up about 500-600 per month.

Now, there is a wrinkle here of course.  There is a possibility that about half of this debt could be forgiven after 10 years under PSLF.  But that is way up in the air with the new administration.

I welcome any insight.  Thank you all

[Account Closed]

I struggled with student loan debt for about 20 years.  I was on the income based repayment program for years at $720/month and they were earning more interest than what I was paying down.  It ballooned to $113,000.

Pay off the student loan debt

Here's the thing - the student loan debt is not forgivable in bankruptcy and if/when times get hard, the first thing most folks do (like myself) is request a deferment, forbearance, or take some community college courses at night when those two aren't available.  I have been there.  I have done that.  It will haunt you.

Being on a plan that promises forgiveness is also no guarantee.  I thought I was all set with loan forgiveness based on the original loan origination date, but then I learned that because I consolidated loans a few years after graduating to take advantage of lower rates, the clock restarted.

I also learned that the "income based" repayment program is a scam.  They advertise you can use your 1040 "adjusted gross" income or if it "isn't representative", you can use your W-2 income.  That works well if you consistently have a job and don't get paid a severance after getting laid off.  I got laid off...and was paid a 9 month severance which inflated my 1040 adjusted gross income.  I tried to adjust the following year to my W-2 income...they look at gross wages on your W-2, not net (net of 401(k), net of before tax health insurance, etc.) which is what your 1040 adjusted gross income is based on it.  I appealed it...and I lost.

Pay off the student loan debt