Should I use home equity to pay for my kid's college?

College is more expensive than ever, especially with federal cuts to student loan options. If you own your home, you may be considering using your home equity to fund your child's education.

Instead of traditional student loans, you could get a home equity loan or a home equity line of credit (HELOC) to pay tuition and room and board.

But should you?

Home equity loans and HELOCs are second mortgages that allow you to borrow against the value you've earned while paying your mortgage. The money can be used for almost anything — home improvements, paying down debt and, yes, your children's tuition.

A home equity loan is a one-time cash infusion that is repaid with a fixed interest rate, typically over a 30-year period. Most lenders cap homeowners at borrowing 85% of their home's value but Rocket Mortgage, one of our top picks for home equity loans, approves up to 90%.

A HELOC, meanwhile, is a revolving line of credit that allows you to withdraw what you need during a 10-year draw period, during which you only make interest payments. When that phase ends, you begin making full principal and interest payments for up to 20 years, depending on the terms of your loan.

PNC Bank approves borrowers for HELOCs with credit scores as low as 600, compared to the industry standard of 640.

College expenses will vary from year to year, based on tuition, financial aid offerings, housing, work study and other factors. So, a HELOC may be the stronger option if you're tapping into your home equity to pay for schooling: Its revolving structure allows you to borrow only what you need.

So you've determined that you can leverage your home equity to pay for your child's college education. But is it a smart strategy?

There are some pros: You'd get a lower interest rate than with private student loans.

However, these are secured debts that use your house as collateral, so if you fail to make timely payments, your lender could foreclose. Federal and private student loans are unsecured, so lenders can't seize your assets to recover losses.

Additionally, if you take out a HELOC or home equity loan, it would be considered additional income and could affect your access to financial aid the following year.

There are many other ways to pay for your child's education than a home equity loan or HELOC. In most cases, it's best to exhaust all these options before you touch your home equity.

Federal aid

Check what financial aid you're eligible for by filling out the Free Application for Federal Student Aid (FAFSA). Your child may also be eligible for federal loans, grants and scholarships, which will offset how much you need to take out with a private lender.

Interest rates on federal student loans, like Parent PLUS loans, are typically lower than both private student loans and home equity products.

Grants and scholarships

Private institutions also provide students with grants and scholarships based on academic merit, athletic performance, civic involvement and other categories.

According to SoFi, more than $100 million in college scholarships and over $2 billion in grants are left unawarded each year.

This list connects students with grants and scholarships they may qualify for.

Private student loans

If you've exhausted federal loans, scholarships, grants and other aid, there are also private loans available from banks and other lenders.

Sallie Mae®* is known for offering low rates and not charging origination fees or prepayment penalties.

Tuition payment plans

See if your child's school offers a tuition payment plan, which allows you to pay off their bill over the year instead of in one lump sum before the semester starts. (There are also third-party lenders that offer payment plans.)

When you sign a payment plan, however, you essentially take out a short-term loan, and the consequences of late or delinquent payments can be more severe. You'll get hit with steep late fees, and you may not be able to graduate.

529 savings plans

Parents can start saving for college while their kids are still in diapers with 529 savings plans. Funds invested in these state-sponsored plans grow tax-free, and withdrawals are also tax-free as long as they are used for qualified education expenses. 

Starting in 2024, unused funds from a 529 plan can be rolled over tax-free into a Roth IRA account, effectively turning it into a retirement account.

New York's 529 College Savings Program, managed by Ascensus College Savings and available in all states, is one of our top picks for these savings plans. You can put as much as $520,000 into the account.

In most cases, it's best to use another method to pay for your child's tuition. See if you can get scholarships, grants or public student loans first (your child and you may be eligible).

If those avenues won't work for you, see if you can get a private loan or a personal loan — both do not require you to put your home up for collateral.

If these financing options are not right for you, ensure that you can comfortably afford the monthly home equity payments before proceeding. You will probably need good credit and a loan-to-value ratio of 80% or more to be eligible.

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Information advertised valid as of 11/25/2025. *