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

Key components of a financial plan

Multiple accounts can make it easier to follow a monthly budget

Preparing for retirement: 8 steps to take

How to talk about money with your family

Reviewing your beneficiaries: A 5-step guide

Retirement income planning: 4 steps to take

Good money habits: 6 common money mistakes to avoid

Is a Health Savings Account missing from your retirement plan?

Your 4-step guide to financial planning

How grandparents can contribute to college funds instead of buying gifts

How does money influence your planning?

Do your investments match your financial goals?

What is a CLO?

An investor’s guide to marketplace lending

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

Retirement savings by age

What are conforming loan limits and why are they increasing

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

Key milestone ages as you near and start retirement

How to improve your business network security

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

8 steps to take before you buy a home

Preparing for retirement: 8 steps to take

Evaluating interest rate risk creating risk management strategy

Money Moments: How to finance a home addition

3 reasons governments and educational institutions should implement service fees

Higher education and the cashless society: Latest trends

How to avoid student loan scams

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

Working with an accountability partner can help you reach your goals

What to do with your tax refund or bonus

What’s the difference between Fannie Mae and Freddie Mac?

4 benefits of independent loan agents

At your service: outsourcing loan agency work

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

Changes in credit reporting and what it means for homebuyers

Checklist: 10 questions to ask your home inspector

Closing on a house checklist for buyers

How to build wealth at any age

Investment strategies by age

These small home improvement projects offer big returns on investment

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

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

5 financial goals for the new year

How to get started creating your business plan

How to financially prepare for pet costs

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

ABL mythbusters: The truth about asset-based lending

Checklist: financial recovery after a natural disaster

Preparing for adoption and IVF

11 essential things to do before baby comes

Webinar: Uncover the cost: Starting a family

Are you ready to restart your federal student loan payments?

Tips for handling rising costs from an Operation HOPE Financial Wellbeing coach

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

Mindset Matters: How to practice mindful spending

Uncover the cost: Wedding

What is Medicare? Understanding your coverage options

Using 529 plans for K-12 tuition

Retirement plan options for the self-employed

How to open and invest in a 529 plan

How much life insurance do I need?

Managing the rising costs of payment acceptance with service fees

Middle-market direct lending: Obstacles and opportunities

How jumbo loans can help home buyers and your builder business

Prioritizing payroll during the COVID-19 pandemic

5 tips to help you land a small business loan

Streamline operations with all-in-one small business financial support

5 steps to take before transitioning your business

Make your business legit

How to establish your business credit score

Talent acquisition 101: Building a small business dream team

5 things to know before accepting a first job offer

How to save money while helping the environment

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

Opening a business on a budget during COVID-19

When to consider switching banks for your business

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

7 steps to prepare for the high cost of child care

How to save for a wedding

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

5 things to consider when deciding to take an unplanned trip

How to talk to your lender about debt

Stay committed to your goals by creating positive habits

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

How to test new business ideas

How can I help my student manage money?

Bank from home with these digital features

Is your employer long term disability insurance enough?

8 steps to choosing a health insurance plan

7 things to know about long-term care insurance

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

Year-end financial checklist

Comparing term vs. permanent life insurance

Achieving their dreams through a pre-apprenticeship construction program

Tech lifecycle refresh: A tale of two philosophies

6 questions students should ask about checking accounts

Credit: Do you understand it?

Test your loan savvy

How do I prequalify for a mortgage?

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

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

How to use your home equity to finance home improvements

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

6 questions to ask before buying a new home

What to know when buying a home with your significant other

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

Is it the right time to refinance your mortgage?

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

Home buying myths: Realities of owning a home

Webinar: 11 insider tips for student debt

10 uses for a home equity loan

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

How to apply for federal student aid through the FAFSA

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

Tips to overcome three common savings hurdles

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

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

Helpful tips for safe and smart charitable giving

Growing your savings by going on a ‘money hunt’

Friction: How it can help achieve money goals

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

What to consider before taking out a student loan

Here’s how to create a budget for yourself

Common unexpected expenses and three ways to pay for them

Are savings bonds still a thing?

Allowance basics for parents and kids

9 simple ways to save

Do you and your fiancé have compatible financial goals?

What military service taught me about money management

Recognize. React. Report. Caregivers can help protect against financial exploitation

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

Learn to spot and protect yourself from common student scams

College budgeting: When to save and splurge

How I did it: Paid off student loans

The A to Z’s of college loan terms

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

Costs to consider when starting a business

Questions to ask before buying a car

Should you give your child a college credit card?

Adulting 101: How to make a budget plan

You can take these 18 budgeting tips straight to the bank

Your financial aid guide: What are your options?

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

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

Understanding guardianship and power of attorney in banking

How to stop living paycheck to paycheck post-pay increase

What you need to know about renting

What’s in your emergency fund?

Certificates of deposit: How they work to grow your money

What you should know about buying a car

Take the stress out of buying your teen a car

How to choose the best car loan for you

Practical money skills and financial tips for college students

Personal finance for teens can empower your child

5 reasons why couples may have separate bank accounts

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

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

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

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

How to use debt to build wealth

How to build credit as a student

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

Money Moments: Tips for selling your home

How I did it: My house remodel

Everything you need to know about consolidating debts

Does your savings plan match your lifestyle?

Student checklist: Preparing for college

Webinar: Uncover the cost: College diploma

Your quick guide to loans and obtaining credit

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

Webinar: Bank Notes: College cost comparison

How you can prevent identity theft

4 questions to ask before you buy an investment property

Parent checklist: Preparing for college

Evaluating interest rate risk creating risk management strategy

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.