Student Debt vs Mortgage Debt

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  • Student Debt vs Mortgage Debt
Author: Joseph Reinke, CFA

Student loans and mortgages are forms of debt. However, not all forms of debt are created equal. In this article, we compare students debt vs mortgage debt by highlighting 3 differences you should know.

Understanding these differences are key if you are trying to decide which debt to pay off first.

Type of Debt

Student debt is considered unsecured debt. Unsecured debt does not have collateral i.e. they aren’t backed by an asset.

Therefore, they usually have higher interest rates. Some other examples of unsecured debt are things such as credit cards and personal loans.

Mortgage debt is considered secured. Secured debt is backed by an asset. What this means is if something happened and you can’t make payments, the lender can take your asset.

This is important to understand because when you are developing your financial plan, unsecured debt is less risky to have although it is at a higher interest rate. I.e. its more risky to the lender, less risk to you.

For example, if you default (don’t make your payment) on unsecured debt such as a student loan, the worst that can happen is wage garnishment.

If you default on secured debt, the lender will take the asset. For example, if you do not pay your mortgage debt payment, the lender will take the house.

Interest Rates

Interest rates for both federal student debt and mortgage debt are determined differently.

Federal student debt rates are set by the Department of Education and then Congress passes them into a law. According to the Congressional Budget Office (CBO), the rates are set each year in the spring and it’s based on the 10-year Treasury notes plus a fixated increase.

The formulas for each, according to the CBO are listed at:

  • Undergraduate Direct Subsidized and Unsubsidized Loans – 10-year Treasury plus 2.05% (capped at 8.25%)
  • Graduate Direct Unsubsidized Loans – 10-year Treasury plus 3.60% (capped at 9.50%)
  • Graduate and Parent Direct PLUS Loans – 10-year Treasury plus 4.60% (capped at 10.50%)

Interest rates for mortgage debt are mostly based on market rates. When the economy is doing good, that means borrowers can afford more, so the interest rates generally increase.

When the economy is not doing good, interest rates typically fall to counteract and make it more affordable for borrowers to take out a loan.

Specifically, mortgage rates are based on long-term expected returns and inflation.  For more on mortgage rates be sure to check out this quarterly real estate update podcast.

How To Pay Off The debt

Mortgage debt is one loan.  Therefore, its easy. You simply pay that one loan and you have no other choices.

Most graduates will have between 5 – 15 student loans.  You must figure out which one to pay off first is important as each specific student loan has its own separate interest rate.

Not only that but for student debt you also need to decide between paying off your debt or going for forgiveness.

In short, student debt repayment is way more complicated than repaying a mortgage.  The confusion is why new grads have used FitBUX to figure out repayment strategies on more than $1.5 billion in student debt.


When it comes to student debt vs mortgage debt, there are three key differences: The type of debt, interest rate, and how to repay them.

We’re always here to help.  If you have any questions, become a FitBUX member and use our one-of-a-kind financial planning technology so you can achieve financial freedom as soon as possible.

By David Hughes and reviewed by Joseph Reinke, CFA


Joseph Reinke, CFA

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About the Author

Joseph Reinke is a Chartered Financial Analyst (CFA) Charter Holder and founder of FitBUX which has helped over 14,000 young professionals on their journey to financial freedom. Joseph has been personally investing since he was 12 years old.

In addition, he has experience in student loans, mortgages, wealth management, investment banking, valuation, stock trading, and option trading. He has been on 100s of podcast and has been invited to 100s of universities to discuss financial planning with their soon to be graduates.

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