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Starting to think about college for kids. What is better, HELOC or student loan

If worst comes to worst, I'll have to finance some of their college education, but I don't want to lose the house if things go wrong so I am thinking that if I lost my job for a long period of time, I could declare BK and continue making mortgage payments, but default on student loan and still keep the house?  That would be if worst came to really worst case scenario, which I hope won't happen.   What do people generally do if they can do both:  HELOC or student loan?
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September 08 2010 - Richmond Hill
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im sure all loans have different regulations as well as different rates.  When i took out my loan, there was no interest and no payments till i finished school.  Do your DD when getting a loan, and ask lots of questions like this.  
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October 12 2010
Profile picture for SoCal_Engr
"You dont have to begin paying off student loans untill your child either graduates or leaves the school.  (something to keep in mind)"

But that doesn't mean that the loan won't start accruing interest. Some loans defer interest until graduation, others start accruing immediately.
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October 11 2010
Every one has a different situation, so....check the current rates on both the student loan and the heloc.  You dont have to begin paying off student loans untill your child either graduates or leaves the school.  (something to keep in mind) 

Also you should apply for the student grants that every school has, pell grant ect, maybe you will qualify for some money there also.
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October 11 2010
Profile picture for manhattanmortgage
Interest Only Loan your best bet. Cheapest way to go WHEN you pay it off faster with larger payments
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September 13 2010
Profile picture for SoCal_Engr
When the time comes, you will need to fill out a FAFSA (Free Application for Student Aid). There is a category of federally backed student loans that are preferrable - as they will not accrue any interest until 6 months after the student graduates. Also, pursue all the grants/aid you can get.

We just sent our youngest to college, and more than half of his expenses (tuition, room and board) are being covered by outright grants. With the interest-deferred loans, we're only having to shell out about 40% of the annual costs. It's still not cheap, but easier to handle than 100%.

Also, there are options to ease the cost of college. My older son is getting his GE out of the way at a local JC prior to transferring to a 4-yr school. Also, it's never killed anyone to help pay their own tuition.

So...

Get all the scholarships, grants and interest-deferred student loans you can get. Then supplement that with what you have managed to save. Borrow against your home only as a last resort.
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September 12 2010

I think in this day and time if you can get a HELOC you should. 
They are nearly a thing of the past so if you could have a line of credit in place it is a huge advantage. 

If you use that for school is a personal decision ...  goes deeper ... but I'd get it (the HELOC) while the getting is still good.

Sincerely,
Celia
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September 12 2010
Profile picture for Trump Junior
Not trying to do any scamming, just looking at worst case scenarios and trying to figure out best option.  You see, taking out a home loan is the obvious choice if you want to pay for the kids college but don't have the cash.  However I learned from these posts that it is not the right way because I could lose my home.  It is better to have the kids get a loan and then help them pay it off. (Assuming financing the education is necessary at all)
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September 08 2010
Profile picture for the_country_hick
I know it is still early in the process.

Talk to a local college (if possible) and ask them about financing options. Also things like pell grants (free money from the government) to find out based on your income and situation what programs you could be eligible for. That way in a few years when it matters you already know what you are facing. 
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September 08 2010
Profile picture for wetdawgs
I'm sure you don't want to give your kids the impression that your intent is to scam the system.   Right?

I hope they are excelling in school so they can qualify for scholarships.   They may not offer a full ride, but they will help.
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September 08 2010
Profile picture for sunnyview
When I was a student, I heard of a girl who paid for her education and a new car on mostly credit cards. When she graduated, she stopped paying and negotiated for a fraction of the borrowed amount. Maybe it's an urban legend, but if she had student loans, she would have been stuck with them til death or disability.

If your kids still have a few years to go before college, maybe you could have them start for the first two at a less expensive college or even a community college with  the goal of transferring to a more expensive university for the last two. This site had a good scholarship search here. That might get them thinking about what they could do to make themselves more attractive to sources of free college money. It's like dating scholarship style.
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September 08 2010
Profile picture for wetdawgs
Keep saving like a maniac, and work hard to continue to teach them the different between need and want.  

Excellent educations can be obtained through state schools, and one doesn't have to go to a school with a tuition of $45k/year.

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September 08 2010
Profile picture for Trump Junior
Thanks, people for the very informative advice that I was not aware of.  They are 14 and 15 and I have about a quarter of what I would need with no assistance saved up.  Yes, I have been spoiling them I suppose.
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September 08 2010
Profile picture for wetdawgs
What age are these potential students?   How about saving like a maniac from this minute forward and having the kidlets working hard contributing to their funds.  Yeah, I know you've been spoiling them. 

Student loans and defaulting?  This is not so easy.   Even discharging them through bankruptcy is pretty tough.  
 

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September 08 2010
Profile picture for the_country_hick
Student loans are NOT dischargeable in bankruptcy (except in cases of permanent disability). That changed several years ago. 

If you get a heloc you potentially could lose your house. 

Student loans can be deferred. That means you tell the loan servicer you are out of work and can not pay. The interest still adds up. When you get a job once again and can afford to pay you just pay the loan once more.

Since student loans are government critters they will suck money from social security, tax refunds and so on until they are paid off. Most student loans are made in the name of the student.

I would check into government grants. The college should have a student loan section that can help with this aspect. There are also many private grants of various amounts also available. The other aspect many do not think of is to have the government pay for college. All you have to do is sign up, enter into the military (air force or coast guard only if smart here) and in a few years of service no loans exist. 
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September 08 2010
 
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