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Home equity loan to pay tuition?
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Anonymous
| We are currently just barely managing to pay DC1's tuition. There is absolutely no way in the world that we will be able to pay two private school tuitions out of income, and I am already beginning to worry, since DC2 will be entering K in two years. We have a fairly large amount of equity in our house, however, and I am wondering if it is a totally crazy financial move to tap that to pay tuition? Has anyone else done this, and if so, any advice? Thanks. |
Anonymous
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for elementary school?????
Don't do it! |
Anonymous
| yes, that would be crazy especially in a market where RE prices (and thus equity) are falling and tuitions are rising. Save such measures for college, if need be. Unless there's some other reason to believe that your inability to afford tuition is truly temporary and very short-term. (Like say, you're on the verge of completing law school or med school and already have a lucrative job lined up.) |
Anonymous
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You can't be serious.
There is not a financial advisor on the planet (I hope) who would tell you that this is a good idea. If you don't have the money, you don't have the money. End of story. Do you really want to end up as another foreclosure statistic, just so that you can say that your kids go to a certain elementary school???? |
Anonymous
| Don't do it. Home equity isn't an endlessly increasing font of wealth, especially in a poor economy. You have to think about your long-term situation. Using home equity is simply not sustainable. |
Anonymous
| I'm not the OP, but these responses confuse me. So many other posts have said that private schools expect you to use home equity to pay tuition before they'll give you financial aid...? |
Anonymous
I was wondering the same thing! Could someone who knows please clarify? Thanks. |
Anonymous
| Just because the schools "expect" you to do it before granting financial aid doesn't mean you should do it! No way. If that's the only way you can afford it, guess what... you can't afford it. |
Anonymous
I'll play devil's advocate for a moment. People use home equity for all sorts of reasonable things--notably, college tuition and home renovations. If OP wanted to use equity for K-12 tuition instead of college tuition, is that a much worse use than these other things? Maybe her kids will go to State U or take out loans for college instead. Maybe she would rather have well-educated kids than a finished basement. All I'm saying is that if OP is certain to able to repay the loan, that it doesn't seem to me a priori terrible to consider home equity. And while it's not that I think private schools necessarily have their families' financial interests at stake, I nonetheless think that if schools expect the use of home equity before financial aid, that it can't be the horrible idea others are suggesting. Feel free to correct me if I'm totally wrong; I'm thick-skinned. 
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Anonymous
If a school expects this then don't go to that school. It's stupid, especially these days, to jeopardize your family's financial future to pay for ANY school tuition. |
Anonymous
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You cannot just give a blanket yes or no answer to this. What if someone had a $1 million house (like on another thread) and no mortgage? Then taking out a home equity line to help pay tuition may not be such a bad idea. It depends on (and not in this order necessarily) what the equity in the house is, what the debt situation of the homeowner is (perhaps they have a minimal mortgage, or perhaps they are highly leveraged with 90% of the home value mortgaged already, and perhaps they have other loans/car loans/student loans/other debts), what their cash flow is now (can they reasonably cover the payments of any debt instrument), what their expected cash flow is going forward (ie maybe they are about to pay off a car loan and will have an "extra $400" per month for example) and so on. You cannot just say it is a bad idea or a good idea without having more financial information.
Also,FWIW, I have mortgaged myself to send my kids to private school. Sometimes if there is a will, there is a way, and we all make choices. |
Anonymous
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OP here. Thanks for the advice. FWIW, we have a fairly sizeable amount of equity, no debt other than our mortgage (the mortgage is probably roughly 30% of the home's value), and (knock wood) a steady income that could cover a few hundred dollars a month in HELOC repayment. We are fine with our children going to public universities for college.
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Anonymous
| We are in a similar situation and just got one and I feel nothing but peace. |
Anonymous
| What about financial aid? Or, is that already part of the equation. At my child's school, folks making a combined income of less than about $200K can qualify for some aid, if there's availability. Also, most schools don't take home equity into account when looking at eligibility. |
Anonymous
Do you have an existing HELOC? Many banks are calling in HELOCS or offering smaller ones than in the past. If you don't have one, your house will have to appraise at the value you expect it to. You are assuming you have "a fairly sizable amount of equity," but the truth is that right now, all of us have much less equity than we think we do. If you want to explore it, just be aware that HELOCs, like other credit opportunities, are drying up for many people. |