Does A HELOC Or Home Equity Loan Make Sense To Pay For College

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In this video we go over the pros and cons of using a home equity loan and a HELOC to pay for college cost
A home equity loan is a secured loan that lets you borrow against your home equity with a fixed interest rate and repayment term. Your interest rate depends on your credit score, payment history, loan amount and income. If your credit improves after you’ve obtained a home equity loan, you might be able to refinance to a lower interest rate.
How you use the money from a home equity loan is up to you. Some use it to pay for major repairs or renovations, like adding a new room, gutting and remodeling a kitchen or updating a bathroom. You can also take out a home equity loan with a low, fixed rate to pay off high-interest credit card debt.
A home equity line of credit (HELOC) is a line of credit similar to a credit card. You can borrow up to a specific amount of your home equity and repay the funds slowly over time.
HELOCs let you access money when you need it and repay it with variable interest. Because of this, you aren’t locked into a specific monthly payment. This is good news for homeowners who don’t know exactly how much they need to borrow and want to pay interest on only the money they access.
Fees for Federal Student Loans
Most federal student loans have loan fees. These fees are a percentage of the total loan amount.
A loan fee comes out of the amount of money that is disbursed (paid out) to you while you’re in school. This means the money you receive will be less than the amount you actually borrow.
You’re responsible for repaying the entire amount you borrowed and not just the amount you received.
The chart below shows the loan fees for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans first disbursed on or after Oct. 1, 2019.
Loan Fees for Direct Subsidized Loans and Direct Unsubsidized Loans
First Disbursement Date
Loan Fee
On or after 10/1/20 and before 10/1/23
1.057%
On or after 10/1/19 and before 10/1/20
1.059%
Loan Fees for Direct PLUS Loans
First Disbursement Date
Loan Fee
On or after 10/1/20 and before 10/1/23
4.228%
On or after 10/1/19 and before 10/1/20
4.236%

[@pattyfazzini]

Thanks for this information, Ed! Great breakdown.

[@psnat7198]

Thank you one more question, do heloc or home eqyloan to buy a replacement home ( first buy then sell current primary residence) affect the available income and hence the EFC calculation for FAFSA or CSS

[@clarkerots9348]

Thank you. West Morris Central HS, Class of 2024

[@randy_g2094]

Thank you for all the advice. Ashley, at Bryant High School in Arkansas. Class of 2023

[@lauraharper9909]

Kara HARPER class of 2024. Scappoose High School.

[@ryanneumeyer5553]

Thanks for the video and for breaking this down for us. Very helpful! Roxbury Class of 2024

[@edzamoracollegeprepchannel3820]

Thank you for watching your high school has been counted

[@josephbielski8027]

Emily Bielski Hackettstown High School class of 2023

[@karendeane7786]

IHA 2023 Awesome breakdown