College tuition can cost you and your family tens of thousands of dollars each year. And while some parents can save enough money throughout the lifetime of the child, many are forced to find alternative ways to afford higher education.
Your first instinct may be to pull out a federal parent loan or private loan, but if you own your home, your home equity may be a cheaper solution to pay for college.
Whether or not you should use your home equity to pay for college depends on your unique circumstances. However, our bankers at Cornerstone Bank are always here to help you make the decision.
To get you started, here are a few things you should consider when determining whether your home equity can help you afford your child’s college tuition.
Learn more about home equity loans and how you can use them.
Do you have equity on your home?
First thing’s first—you need to find out if you have enough equity on your home to borrow. The only way to determine the exact amount is through a real estate appraiser. You can also look at estimates based on what similar homes in your area are selling for. Remember, those will be just estimates, so you don’t want to make a plan on those alone. In doing so, you’ll be able to understand how much money you can borrow for different expenses like college tuition or even paying back taxes.
Will you be able to pay back what you borrow?
A lot of people choose a home equity loan since it enables them to receive a lump sum amount. The main thing to consider, though, is whether or not paying the loan back will be feasible. To be completely transparent, when you borrow money using your equity, your house can be on the line if you don’t make the payments. Therefore, you should only use your home equity to pay for college if you can afford to pay it back.
Have you reached the federal aid limit?
Federal loans for college expenses do come with a cap. For example, the maximum amount the government will give a dependent first year student is $5,500. In some instances, this could cover tuition, but in most scenarios, that’s not the case. If you still need money outside of federal aid, your next option would be private loans (and scholarships if applicable). One thing to think about is interest rates. Student and parent loans tend to come with a higher interest rate than borrowing your home equity, which could save you money in the long run.
Our bankers at Cornerstone Bank are here to help.
Since 2001, Cornerstone Bank has put our customers first, and that means giving them the best banking has to offer. We don’t believe in simple banking; rather, we go above and beyond to help our customers make their money work for them.
For more information about using your home equity to pay for college, visit our Overland Park office or give us a call at 913-239-8100 to let us know how we can help.