Parents

Understanding Home Equity Loans

A Home Equity Loan is basically a second mortgage where the applicant's residence is used as collateral for a secure line of credit based on the available equity in the home. Homeowners can often borrow up to the current value of their home, minus any outstanding amount owed and use the funding to pay for any expenses, including education expenses.

Interest on a home equity loan could be fully tax deductible, while interest on student loans allow for a fixed maximum deduction each year on the interest paid. Check with an accountant to understand how available tax benefits on home equity vs. student loan products may benefit you.

The interest rate on a home equity loan is often higher than the interest on federal student loans, but lower than interest rates on private student loans.