How can I use a home equity loan or line of credit to pay for college?
A home equity loan or equity line of credit is, in effect, a second mortgage. The equity in your home is collateral for a loan or a line of credit. A line of credit will generally carry a higher interest rate but offers more flexibility. If you want to fund college expenses a year at a time with the intention of paying the balance off during the year, the line of credit may be the best way to go. If, on the other hand, you want to take a loan out for the entire college expense or feel that you want the flexibility to pay over the years (and beyond) that your child is in college, the equity loan may be the best way to go. Regardless of the option you choose, both offer a mortgage deduction for income tax purposes, which reduces the effective cost of interest on the borrowed amount.
