Equity Home Loans

What is the best way to finance your kids college tuition payments? Loans, home equity??

Would it be better to use 401K loan, home equity, etc.

Public Comments

1. Home equity loan -- interest is tax deductible
2. Talk to a financial advisor who is experienced in college planning. The proper steps can maximize your child's financial aid. Your 401k and IRA should be the last resort.
3. home equity loan is usually "cheap money" student loans are a 2nd choice...the interest rate is usually a bit higher, but it's still tax-deductible any money paid should be paid directly to the school (not to the student to pay the school) to keep tax deductions clean & completely accurate
4. Refinance your home and take enough $$ to pay for college.
5. Depending on the age of your children - if they are over 14-15, liquid savings accounts, student loans and grants would be best. Check with your state to see if you can contribute to a 529 plan - if your children are very young, you can contribute to this state-run fund and pay toward a tuition today that will cost much more in the future due to inflation - even low (2%-3%) inflation. One caveat is that some states' plans are better than others, of course, and the expenses (listed as "expense ratio") can be high (anything over 1%). You could check with Money magazine or SmartMoney websites (or the library) that reviews these programs from time to time. I would strongly discourage you from using your 401(k) loan option. While there are Student Loans to pay for tuitions, there are no Senior-aged Person Loans to pay for what could be a 20-year retirement. Plus, you're putting in pre-tax dollars into your 401(k) and if you borrow from it, you will be paying it back with after-tax dollars. Then, when you reach retirement, you will pay taxes a second time when you draw it out as ordinary income - hence double taxation.