Dear Dr. Don,

I can refinance my current mortgage with a 15-year 3.5% product and take out $40,000 to completely pay off two of my daughters' student loans, which are at a 7% interest rate. The monthly mortgage payment on the cash-out refinancing will remain virtually the same as my existing mortgage.

There are still two more kids to finance through college. One is in her final year of college and the other is a high school junior. My plan is to use the $700 I would not be sending out each month in mortgage payments into our retirement accounts and toward future college savings for the high school student. My husband is 59 and I am 58.

Will I lose any valuable student loan interest deductions that outweigh the benefit of my plan?

-- Judy Juxtaposition

Dear Judy,

I'm more worried about you having a mortgage payment well into your 70s than I am about you losing valuable student loan interest deductions. That said, assuming you can fully use the mortgage interest deduction on your income taxes, the cash-out refinancing that you want to do to restructure your debt would still generate a tax deduction.

You get a bigger tax deduction when you pay 7% interest than when you pay 3.5% interest, but what you're really interested in is comparing the effective after-tax rate. Bankrate has a mortgage tax-deduction calculator that will help you calculate your effective interest rate on the cash-out refinancing.

I don't have to tell you that financing four children's college educations is an expensive proposition. In combining the money you borrow to finance college costs and your mortgage balance, the goal should be to minimize the total after-tax interest expense.

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