Borrowing from your home’s equity may be a piece of your student’s financial solution. You certainly would not want to exceed the $100,000 home equity line limit or run afoul of the original home acquisition debt rules for mortgage interest deductions (with regards to multiple cash-out refinancings). Common alternatives include student loans, college savings plans, work study programs, lower cost options (try two years at a community college first before transferring to an instate, four-year university) and so on. Investment cash flow from brokerage accounts or real estate rentals can help pay scheduled monthly tuition bills. Taking penalty-free (but taxable) 72(t) distributions from retirement assets would be a last resort as you should not sacrifice your own retirement plans for college bills. Seek out college planning specialists whose business is to help you match your student and their specific interest or talent with a university or college with specific aid and loan financing packages.

The best time to develop a strategy for paying for college expenses is before your child begins college. Ideally, parents should begin saving early and regularly to fund a college education. Given college costs today and projections for the future, it makes sense to include discussions about how that college education will be funded with your child. Ultimately, like with any large purchase, you must budget appropriately and do so prior to making the purchase. And, yes, while a college education is without question an investment in your child, it is still a large purchase. Planning allows you and your child time to save and invest for college expenses, and time to apply for loans, grants and scholarships to help cover the shortfalls that you may have. The idea that the equity in your house can be used as your personal “bank” is part of what has created the economic crisis that our country is facing today. By the time your child is attending college, and particularly in the middle of the school year, your choices are very limited. Planning is key to managing your money and meeting your expenses. Schedule a meeting with a financial adviser to assist you with developing a strategy for paying for college and managing your home mortgage.

Unfortunately, too many people rely on home equity to pay for their children’s education This strategy relies on appreciation being there when you need it, and it also involves having to pay back the loan over many years The best strategy for college funds is always saving it up-front and not relying on borrow ing the funds when needed. Obviously, in this situation the funds have not been saved so a loan is the main option. The main advantage of borrowing against the house is the fact that the interest that they will pay is tax deductable. Thus the net cost of the loan is the loan rate minus the tax savings Other options are to have the student take college loans if they can, which probably would be more expensive. In addition, I would vigorously pursue any scholarships that are available. There are plenty of scholarships, but it takes work and persistence to look and apply for them. Finally, if the equity loan is your only option, make sure that you make a payment plan that pays the money back over a reasonable time. Otherwise, you will simply receive less when you ultimately sell your house. With today’s housing prices, relying on the use of equity is a risky strategy.

First, lets just get the statement out there that college isn’t cheap. Room, board, tuition, books, etc. at a four-year public school will cost $10,000+ per year; a private school will cost $25,000+ per year; and if you are headed to an Ivy League school, figure on a bill of $40,000+ annually. Having said that, most people don’t have to pay fullfreight because of grants, loans, scholarships, etc. I have always said that college debt is good debt. If you do decide to use the equity in your home, just make sure you don’t overextend and find yourself in a position where the monthly payment becomes overwhelming and your income is insufficient to make the payment. There is a lot of hard work involved in securing money for college ... but the rewards are many fold. Good luck.