Home equity could provide an ample source of college funding, but borrowing against it is a financially risky move.
Proud of your new high school graduate but still wondering how you’ll pay for college? If you’re a homeowner, you might be eying your home equity, the current value of your home minus the amount still owed on your mortgage.
For example, say you have a $350,000 home and you still owe $150,000 on the mortgage. That means you have $200,000 in equity and could get a HELOC that goes up to $160,000. In contrast, with a federal, you’re limited to exactly what’s needed: your student’s school-determined cost of attendance minus any other assistance they receive.
Interest rates on Parent PLUS loans hit a record high for the 2024-2025 school year, and private student loan interest rates may also be in the 8% to 9% range, if not higher. HELOCs generally have adjustable interest rates, which can make it hard to predict what your monthly loan payments will be. In contrast, with a Parent PLUS loan, you lock in the interest rate when you take out the loan. Borrowers may choose a fixed rate for private student loans, and refinancing is an option for private loans if rates drop.Start by taking a step back and assessing your financial needs.
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