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

April 05, 2018

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, college educations are 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 an 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

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

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

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

When small companies buy big: The potential of asset-based lending

How to maximise your infrastructure finance project

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

Changes in credit reporting and what it means for homebuyers

Webinar: Cash management strategies for higher education

Evaluating interest rate risk creating risk management strategy

How to improve your business network security

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

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

Tech lifecycle refresh: A tale of two philosophies

Changes in credit reporting and what it means for homebuyers

4 benefits of independent loan agents

At your service: outsourcing loan agency work

Middle-market direct lending: Obstacles and opportunities

Tailor Ridge eBill case study

CFO survey: A shifting focus on ESG in business

CFO insights: Leading the recovery for sustainable growth

CFO report: Driving growth via new business models and technology

5 steps to take before transitioning your business

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

Opening a business on a budget during COVID-19

Make your business legit

Talent acquisition 101: Building a small business dream team

How to establish your business credit score

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

How to test new business ideas

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

Costs to consider when starting a business

How to get started creating your business plan

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

How jumbo loans can help home buyers and your builder business

How a small business is moving forward during COVID-19

When to consider switching banks for your business

Prioritizing payroll during the COVID-19 pandemic

5 tips to help you land a small business loan

Investing in capital expenditures: What to discuss with key partners

5 financial goals for the new year

Key components of a financial plan

How to manage your money: 6 steps to take

Good money habits: 6 common money mistakes to avoid

Year-end financial checklist

How to talk about money with your family

Reviewing your beneficiaries: A 5-step guide

Retirement planning in the gig economy

5 unexpected retirement expenses

How to build wealth at any age

Retirement income planning: 4 steps to take

4 tips to help you save for retirement in your 20s

Key milestone ages as you near and start retirement

Preparing for retirement: 8 steps to take

Comparing term vs. permanent life insurance

3 types of insurance you shouldn’t ignore

Is your employer long term disability insurance enough?

How much life insurance do I need?

Is a Health Savings Account missing from your retirement plan?

8 steps to choosing a health insurance plan

What is Medicare? Understanding your coverage options

7 things to know about long-term care insurance

The connection between your health and financial well-being

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

Achieving their dreams through a pre-apprenticeship construction program

Do your investments match your financial goals?

Investment strategies by age

Webinar: Uncover the cost: Starting a family

11 essential things to do before baby comes

Preparing for adoption and IVF

Closing on a house checklist for buyers

Checklist: 10 questions to ask your home inspector

Student checklist: Preparing for college

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

Webinar: 11 insider tips for student debt

Checklist: financial recovery after a natural disaster

College budgeting: When to save and splurge

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

Webinar: Uncover the cost: College diploma

The A to Z’s of college loan terms

Learn to spot and protect yourself from common student scams

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

6 questions students should ask about checking accounts

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

Webinar: Bank Notes: College cost comparison

How I did it: Paid off student loans

How to avoid student loan scams

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

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

How you can prevent identity theft

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

Friction: How it can help achieve money goals

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

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

5 things to consider when deciding to take an unplanned trip

Stay committed to your goals by creating positive habits

Webinar: Smart habits and behaviors to achieve financial wellness

Working with an accountability partner can help you reach your goals

Growing your savings by going on a ‘money hunt’

Your 4-step guide to financial planning

A who’s who at your local bank

Does your savings plan match your lifestyle?

Webinar: Uncover the cost: Wedding

Adulting 101: How to make a budget plan

Tips to overcome three common savings hurdles

What military service taught me about money management

Are savings bonds still a thing?

Allowance basics for parents and kids

What’s your financial IQ? Game-night edition

Helpful tips for safe and smart charitable giving

Webinar: Mindset Matters: How to practice mindful spending

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

How having savings gives you peace of mind

How to save money while helping the environment

How can I help my student manage money?

You can take these 18 budgeting tips straight to the bank

Common unexpected expenses and three ways to pay for them

Multiple accounts can make it easier to follow a monthly budget

Personal finance for teens can empower your child

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

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

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

Do you and your fiancé have compatible financial goals?

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

How to save for a wedding

7 steps: How couples and single parents can prepare for child care costs

9 simple ways to save

Here’s how to create a budget for yourself

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

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

5 reasons why couples may have separate bank accounts

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

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

What’s in your emergency fund?

Certificates of deposit: How they work to grow your money

What you need to know about renting

It’s time for a fresh start: A new way of thinking

Building a financial legacy for your family and community

Understanding guardianship and power of attorney in banking

How to stop living paycheck to paycheck post-pay increase

Bank from home with these digital features

Parent checklist: Preparing for college

Your financial aid guide: What are your options?

How to open and invest in a 529 plan

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

Be careful when taking out student loans

Using 529 plans for K-12 tuition

How grandparents can contribute to college funds instead of buying gifts

How to apply for federal student aid through the FAFSA

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 talk to your lender about debt

Everything you need to know about consolidating debts

Your quick guide to loans and obtaining credit

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

How to use your unexpected windfall to reach financial goals

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

What are conforming loan limits and why are they increasing

Home buying myths: Realities of owning a home

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

Webinar: Uncover the cost: Building a home

How I did it: My house remodel

Money Moments: Tips for selling your home

Money Moments: How to finance a home addition

What is refinancing a mortgage?

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

What to know when buying a home with your significant other

Is it the right time to refinance your mortgage?

Webinar: Mortgage basics: How much house can you afford?

Webinar: Mortgage basics: Finding the right home loan for you

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

Webinar: Mortgage basics: How does your credit score impact the homebuying experience?

These small home improvement projects offer big returns on investment

Webinar: Mortgage basics: What is refinancing, and is it right for you?

Webinar: Mortgage basics: Buying or renting – What’s right for you?

Webinar: Mortgage basics: Prequalification or pre-approval – What do I need?

Webinar: Mortgage basics: 3 Key steps in the homebuying process

Webinar: Mortgage basics: What’s the difference between interest rate and annual percentage rate?

8 steps to take before you buy a home

10 uses for a home equity loan

How do I prequalify for a mortgage?

How to use your home equity to finance home improvements

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

4 questions to ask before you buy an investment property

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

6 questions to ask before buying a new home

Webinar: Uncover the cost: Home renovation

Should you give your child a college credit card?

Test your loan savvy

Credit: Do you understand it?

What you should know about buying a car

Questions to ask before buying a car

Take the stress out of buying your teen a car

How to choose the best car loan for you

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

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 by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.