As students are preparing for September courses, now is a good time to remind families that the home equity line is not the best source of college tuition funds.

BusinessWeek reports that many borrowers are using their home equity loans to pay for school - even if it’s just out of convenience:

“A forthcoming survey by student-lending giant Sallie Mae and research firm Gallup reveals for the first time just how heavily families have depended on those costly forms of credit. Although 77% of students and 36% of parents tapped into federal funds, both groups usually turned to other sources to supplement that money—sometimes unnecessarily. Some 19% of parents who borrowed money charged tuition on a credit card, while 20% relied on home-equity loans, taking out $10,854 on average.”

Most students attending accredited colleges qualify for low-rate federal loans. Some are even be able to receive grants or scholarships.

There are many smart ways to use a HELOC (funding necessary home repairs, for example). However, withdrawing borrowed money for school generally sticks parents with a high interest rate and puts their home on the line.

Before joining the 20% of parents who use home equity lines for college tuition, talk with a college financial aid counselor. A quick conversation could save you thousands.

See Also:

5 Financially Sound Ways to Use Your HELOC

Is a HELOC Right for You?

Tags | college, Heloc, home equity line of credit