Question:
I have a home equity line of credit available at 4% interest. I have $10,000 worth of student loans to pay 4.22% interest / $220/month. I earn $40,000 per year. Should I consider paying off the student loans with the home equity line? I do not know how to begin to figure this out!

Answer:
I do not know how to begin to figure this out!

That is a sad comment, where someone with a ton of "student" debt cannot even do simple math. Oh well The trick is to figure out how much each loan costs. That depends on a few items that you did not tell us, like your tax bracket, whether or not the H/E loan is tax deductable, and if the H/E loan is fixed or variable. In general, debt like credit card and store charge cards is short term debt. Cars and student loans are medium term debt. Homes are long term debt. The rule is never to convert debt from a shorter term into a longer term.

For example, if you convert short term credit card debt into long term home equity debt, you could end up paying for a pizza over a 30 year term. That ain't too smart. So, based on this principal, I don't like converting student loans into home loans. Looking at the loans themselves, the H/E loan is almost certainly a variable rate, while the student loan is almost certainly a fixed rate. Interest rates are at all time historic lows right now, so they have only one way to adjust in the future, and that is up. So, the 4.22% is likely to stay fixed, while the 4% could become 6%, 8%, and even 10% before you have this paid off. Why take that risk? The only thing that you gain is that after tax, the H/E loan is more like 3% due to the tax advantage (if you can make use of the tax savings, not everyone can), which is just over a point cheaper, but that is only for the short term. You risk getting burned badly trying to save a few bucks in the short term. Not to mention that the H/E loan will have annual fees and closing costs.