I’ve often said that using a home equity line of credit to pay college tuition is a poor choice, especially if the student has access to low-interest government loans.  However, if other options are not available, using a home equity line of credit does have some benefits.

Finance expert Dan Galli explains: 

“…the Home Equity Line of credit has some advantages over PLUS loans or other college loans. Mainly because the interest (up to $100,000) is deductible. However, the interest rate for a line of credit has the nasty ability to rise and fall with market conditions. For this reason, you may want to consider a second mortage with a fixed interest rate. Try not to let paying for these college costs impact on how much you can save for your own retirement. It’s a tricky balance sometimes.”       

Keep in mind that federal student loan rates are often very low. Although these loans are usually not dischargable through bankruptcy, they have flexible repayment options, are considered “good debt,” and do not put your primary residence at risk.

See Also:

Avoid Using a Home Equity Line of Credit for Tuition 

Fewer HELOCs for College Tuition 

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