home eqiuty line for student loans

My tax guy said that if I take out a home equity line to pay my student loans back that the the interest on the payments to the bank- that now holds my mortgage, would be totally tax deductible.
Is this right?

Ed

Yes, but the interest you pay on student loans is also tax deductible, fully (not on a formula, I mean), so I'm not sure what your tax guy is on about. And there's one advantage to student loans -- if you die before the loan is repaid, the debt is forgiven. That doesn't happen with your mortgage, unless you have PMI.

Right now, you have two interest deductions -- your mortgage and your student loan. If you do what this guy suggests, you'll have only one. That doesn't sound bright to me.

There is a limit, however, to the amount of student loan interest that is deductible per return. That amount I believe is $2500. If your annual interest payments are over that figure, it might be to your advantage to go the HEL route.

Ben

In addition to the $2500 interest limitation, the student loan deduction is also phased out starting at $110,000 MFJ and completely eliminated at $140,000 MFJ. A HELOC deduction isn't affected by these same limitiations. The student loan deduction is also not availbale to taxpayers who are married, filing seperately.

Your accountant could be looking at any of these qualifiers when recommending the HE loan. He probably has one of these factors in mind.

Unrelated to taxes, student loan interest rates are quite high right now, and you can most likely get a better deal on a HE loan.

Also for clarification, PMI doesn't pay your mortgage for you if you die. It pays the bank the difference in their loaned principal in the event of default and/or short sale. PMI does absolutely nothing to protect the homeowner, only the bank.