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Ask Money

Heloc vs. Student Loans

Chris Farrell Jun 3, 2008

Question: Is it better to use money remaining in our HELOC, money in our savings account or to take out student loans to pay for our daughter’s college tuition ($49,000.00)? Linda, Los Angeles, CA.

Answer: We’ve been getting many more questions about equity loans recently. When it comes to paying for college my approach is a mix of student loans, work-study, and parental savings.

I am wary of parents taking out home equity loans for college. The reason is that for most of us one of the best financial moves we can make is to enter our retirement years without a mortgage (or at least a minimal mortgage). This way the home is a critical part of our financial safety net.

In sharp contrast, your daughter has a lifetime of earnings ahead of her. It makes more sense for her to borrow for her education, and for you to help her out along the way (perhaps even after she’s graduated) so that she doesn’t end up with too much debt.

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