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Weighing the Costs of Post-Secondary Education


As a parent, you only want the best for your children. Unfortunately, university and college tuition costs are expensive. They are usually more than most people can afford, even if you save money and your child wins a scholarship. Weighing the costs of post-secondary education is important.

Many parents consider taking out loans to help their children afford tuition without owing thousands in debt when they graduate. Before you commit to a financing plan for their education, learn about your options.

What Types of Loans Are Available?

Firstly, parents should ensure their child has exhausted all opportunities for scholarships, student work-study loans, and grants before taking out a loan themselves. Is every option for funding under examination? Yes? Now you can consider the types of loans and the amount of money you need to finance.

Home Equity Loans and Lines of Credit

If you own your home, you can borrow money based on the accrued equity. It’s not required that you have the mortgage paid off completely to get a home equity loan. This type of loan may be the best bet if you know exactly how much to borrow.  Most of the time, home equity loans are set at a fixed interest rate with a fixed monthly payment.

If you’re not sure how much cash you’ll need to finance their education, consider a Home Equity Line of Credit (HELOC). This type of financing lets you borrow money up to a certain amount. The bank will give you a checkbook so you can write periodic checks for the amount you need. As long as you don’t exceed the maximum the bank allowed.

So, you could write a tuition check at the beginning of each semester using the HELOC. However, HELOCs are usually based on variable interest rates. This means you could pay more each month than you can afford. Additionally, since HELOCs are guaranteed by your house, the bank could foreclose on your home if you can’t make the payments.

Private Loans

Parents with good credit might be able to secure a private loan from a bank or other lender. Since these loans are (typically) not guaranteed by collateral, the interest rate is higher and might be variable, depending on the terms. For large sums, private loans are probably not the way to go. However, if the amount you need to borrow is manageable, you might consider this option.

Pitfalls for Parents

These days, many parents are finding themselves in large amounts of debt because they finance a portion or all of their children’s educations. Additionally, some parents have to prolong retirement or see their social security income garnished because they are delinquent on federal student loans. That’s why it’s important to consider how much of your child’s education you want to finance before getting into too much debt.

It’s admirable to help your child pay their tuition. Just make sure you understand your options and the associated risks before you start.

Are you looking for more information about the costs of post-secondary education? Read Questions to Ask Your Admissions Counselor next.