Is a home equity loan for college the right choice for your student?

July 24, 2023

A home equity loan is often overlooked as a funding option for your child’s college education.

 

If you’re worrying about how you’ll pay for your child’s education or a degree of your own, you may want to consider a home equity loan as one of your options. Typically, a college education is funded with savings, grants, scholarships and federal or private student loans. But a home equity loan for tuition may also be an option that fits your situation.

With a home equity loan, you borrow money against the equity you have in your home. Equity is the difference between the market value of your home and what you owe on your mortgage. For example, if the market value of your home is $250,000 and you owe $190,000, you have $60,000 in equity.

Check out these advantages and risks involved with home equity loans.

 

Advantages of a home equity loan in helping pay for college

Why use a home equity loan when student loans are available? There are limits on how much you can borrow each year through federal student loan programs. A home equity loan can make up the difference if you need additional funds.

Unlike other types of loans, home equity loans often have longer terms. Additionally, they may have lower fixed interest rates than student or other loans. Talk to a U.S. Bank lender to learn more, or start by getting a home equity rate estimate on your home.

 

A HELOC might be better for your needs

Depending on your situation, a home equity line of credit (HELOC) might be a better option to help pay for college. These lines of credit work much like home equity loans, but with a HELOC, you get approved for a line amount, then you borrow only what you need, when you need it. Usually, you get a special access card or checks that let you draw from available credit whenever you need to. This might be an easier option for making tuition payments each semester. In addition, HELOCs offer flexible monthly payment options during the draw period, which may include interest only payments for qualified borrowers or a percentage of the outstanding balance.

Whether you decide on a home equity loan or a HELOC, you can often access funds within days of signing the paperwork to help pay for college.

 

Look before you leap

Although home equity loans and lines of credit come with advantages, it’s important to understand the risks. The most important one is that if you default, you could be putting your home at risk.

Both home equity loans and lines of credit are secured by your home. So, before you make a final decision, make sure you have realistic plans for paying back what you borrow.

 

 

Continue reading to learn more about home equity loans and lines of credit.

Related content

Investment strategies by age

Evaluating interest rate risk creating risk management strategy

6 things to know about long-term care insurance cost and benefits

Is your employer long term disability insurance enough?

How much life insurance do I need?

Preparing for retirement: 8 steps to take

At your service: outsourcing loan agency work

How I did it: Bought a home without a 20 percent down payment

Money Moments: Tips for selling your home

Overcoming high interest rates: Getting your homeownership goals back on track

Everything you need to know about consolidating debts

5 things to consider when deciding to take an unplanned trip

Certificates of deposit: How they work to grow your money

Stay committed to your goals by creating positive habits

What you should know about buying a car

Credit: Do you understand it?

Is it the right time to refinance your mortgage?

6 questions to ask before buying a new home

What is a home equity line of credit (HELOC) and what can it be used for?

Your financial aid guide: What are your options?

9 simple ways to save

Here’s how to create a budget for yourself

Helpful tips for safe and smart charitable giving

Money Moments: 8 dos and don’ts for saving money in your 30s

Understanding guardianship and power of attorney in banking

What’s in your emergency fund?

What you need to know about renting

Maximizing your infrastructure finance project with a full suite trustee and agent

How to build wealth at any age

Your 5-step guide to financial planning

What is Medicare? Understanding your coverage options

8 steps to take before you buy a home

What to know when buying a home with your significant other

5 financial goals for the new year

Retirement savings by age

Allowance basics for parents and kids

How I did it: Turned my side hustle into a full-time job

Retirement plan options for the self-employed

5 reasons why couples may have separate bank accounts

Common unexpected expenses and three ways to pay for them

It's possible: 7 tips for breaking the spending cycle

Closing on a house checklist for buyers

Multiple accounts can make it easier to follow a monthly budget

6 questions students should ask about checking accounts

30-day adulting challenge: Financial wellness tasks to complete in a month

8 steps to choosing a health insurance plan

Key milestone ages as you near and start retirement

How to build a financial plan that covers your savings and expenses

How I did it: Switched career paths by taking an unexpected pivot

What you need to know before buying a new or used car

Year-end financial checklist

An investor’s guide to marketplace lending

What is a CLO?

Beyond Mars, AeroVironment’s earthly expansion fueled by U.S. Bank

ABL mythbusters: The truth about asset-based lending

Collateral options for ABL: What’s eligible, what’s not?

Can ABL options fuel your business — and keep it running?

How to improve your business network security

Evaluating interest rate risk creating risk management strategy

Managing the rising costs of payment acceptance with service fees

3 reasons governments and educational institutions should implement service fees

Higher education and the cashless society: Latest trends

Tech lifecycle refresh: A tale of two philosophies

Changes in credit reporting and what it means for homebuyers

4 benefits of independent loan agents

Middle-market direct lending: Obstacles and opportunities

5 steps to take before transitioning your business

Talent acquisition 101: Building a small business dream team

How to fund your business without using 401(k) savings

Costs to consider when starting a business

How to test new business ideas

How to expand your business: Does a new location make sense?

How jumbo loans can help home buyers and your builder business

When to consider switching banks for your business

5 tips to help you land a small business loan

Good money habits: 6 common money mistakes to avoid

Reviewing your beneficiaries: A 5-step guide

How to talk about money with your family

Retirement income planning: 4 steps to take

Preparing for retirement: 8 steps to take

Comparing term vs. permanent life insurance

11 essential things to do before baby comes

Webinar: Uncover the cost: Starting a family

Preparing for adoption and IVF

Checklist: 10 questions to ask your home inspector

Checklist: financial recovery after a natural disaster

How does money influence your planning?

College budgeting: When to save and splurge

Student checklist: Preparing for college

Uncover the cost of a college diploma

How to save money in college: easy ways to spend less

The A to Z’s of college loan terms

Co-signing 101: Applying for a loan with co-borrower

Practical money skills and financial tips for college students

How to build credit as a student

5 things to know before accepting a first job offer

Learn to spot and protect yourself from common student scams

How I did it: Paid off student loans

Bank Notes: College cost comparison

Tips to earn that A+ in back-to-school savings

How to avoid student loan scams

Webinar: U.S. Bank asks: Are you safe from fraud?

How you can prevent identity theft

5 tips for creating (and sticking to) a holiday budget

Planning self-care moments that matter (and how to finance them)

Growing your savings by going on a ‘money hunt’

Working with an accountability partner can help you reach your goals

Does your savings plan match your lifestyle?

Uncover the cost: Wedding

Are savings bonds still a thing?

Tips to overcome three common savings hurdles

Adulting 101: How to make a budget plan

Personal loans first-timer's guide: 7 questions to ask

Mindset Matters: How to practice mindful spending

How can I help my student manage money?

You can take these 18 budgeting tips straight to the bank

Do you and your fiancé have compatible financial goals?

U.S. Bank asks: Transitioning out of college life? What’s next?

U.S. Bank asks: Do you know your finances?

U.S. Bank asks: Do you know what an overdraft is?

Personal finance for teens can empower your child

How to save for a wedding

Dear Money Mentor: How do I set and track financial goals?

Money Moments: 3 smart financial strategies when caring for aging parents

How to stop living paycheck to paycheck post-pay increase

Bank from home with these digital features

How grandparents can contribute to college funds instead of buying gifts

How to open and invest in a 529 plan

Using 529 plans for K-12 tuition

Is a home equity loan for college the right choice for your student

Parent checklist: Preparing for college

How to apply for federal student aid through the FAFSA

What to consider before taking out a student loan

Are you ready to restart your federal student loan payments?

How to use debt to build wealth

What’s a subordination agreement, and why does it matter?

Understanding the true cost of borrowing: What is amortization, and why does it matter?

Your quick guide to loans and obtaining credit

Dear Money Mentor: What is cash-out refinancing and is it right for you?

What are conforming loan limits and why are they increasing

Money Moments: How to finance a home addition

These small home improvement projects offer big returns on investment

Should you get a home equity loan or a home equity line of credit?

Is a home equity line of credit (HELOC) right for you?

How to use your home equity to finance home improvements

How do I prequalify for a mortgage?

Can you take advantage of the dead equity in your home?

4 questions to ask before you buy an investment property

10 uses for a home equity loan

Test your loan savvy

Should you give your child a college credit card?

Take the stress out of buying your teen a car

Questions to ask before buying a car

How to choose the best car loan for you

Start of disclosure content

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, Home Equity and Credit products are offered through U.S. Bank National Association. Deposit products are offered through U.S. Bank National Association. Member FDIC.