Cashing out home equity to pay for college

[Anonymous]

DD is being admitted but not getting much aid (gpa is lower end and our HHI is around $100k).
DD will need the connections and education that college provides (I expect she will need to be earning her own income as I don’t see her marrying into wealth or being fulfilled in a lifestyle that a salary the likes of her aunts or even myself earn).
I am coming to the conclusion that I will need to come up with a way of funding her college education. I am blessed enough to own (it does have a mortgage on it it) a home and with the recent sales in my area I think the value has gone up enough that I could pull $150k out in cash to pay for her schooling. I don’t know if that will be sufficient if it ends up taking 5 years to get a degree (something I have been told to plan for), I don’t know if the connections she makes will be of help in our city if the school she selects to attend is in some other part of the country, I don’t know if there will be an economic downturn by the time she does earn her degree and suddenly the hiring of 2nd or 3rd tier college grads freezes. I have always been a single mom with no college degree and she is an only. Is this what families do to make college a reality for their kids? Which undergraduate degree/ field of study is worth this type of investment? I would hate to sink all my money and access to money into a degree only to have her come out and get a $40k annual salary job where she needs to work for 6 years before she can reach something better paying. How do families guard against that?
FWIW I expected aid packages to be better, this is my 2nd only year earning around $100k so I expected more need to be met and then I hoped gpa would be better. I wish she had applied to more schools ... the ones she did apply to are not meeting FAFSA calculated need and not offering much merit. Her top choices at this point would be between $34k - $46k a year. Between equity and small savings I can likely gather $200k for her college and be left with very little in my own emergency funds (a 401k loan if I have the need I suppose). Is this how it is done (sans a fully funded 529 or a free ride)?

[Anonymous]

I would not cash out home equity to pay for college.

Can your child consider a state school or even community college, transferring for last 2 years for 4 year degree?

I'd sign loans for DC b4 cashing out home equity.

Unfair to pressure your child to make a significant salary post graduation.

[Anonymous]

I would have her take a gap year, and save as much money as possible while living at home. It would give you more time to save as aggressively as possible. Then reapply more strategically to schools that might offer more FA.

[Anonymous]

No. What a dumb idea.

[Anonymous]

I wouldn’t let her attend the school. I would not touch my home equity to send my child to an expensive school that provided no aid. Public school only. She should apply to be a resident assistant as soon as she’s able. Get a part time job and take out loans. In your situation I’d offer to pay 1/3 to 1/2 and she would be responsible for the rest (through loans or working or RA position). You can help to pay back loans over the longer term, but do not touch your equity or your retirement.

[Anonymous]

OP -- no. You must not use your home equity or savings to pay for your daughter's college.

Have her take a gap year this year and work. Research colleges that may offer better aid. Send her to community college and live at home. Do whatever you can to have her get through college with no debt. That is the best gift you can give her.

[Anonymous]

What is her GPA (weighted and unweighted) and SAT or ACT scores? What state do you live in?

[Anonymous]

And which schools accepted her/denied her?

[Anonymous]

My parents took out a second mortgage to pay for my college (second of three kids.) I did really well in school and received increasing amounts of aid, plus my father's career boomed in his final years so it wasn't a burden to them. I did work study, worked as a waitress & at a Costco in the summers, graduated with loans as well and had a very keen sense of how much had been invested in getting me to where I was. I'm forever grateful to my parents; but I also know my situation was really, really lucky. I don't know if it was sensible for my parents or for you OP.

One small piece of advice though -- before I committed to a school, my father went back to the school to ask for additional aid and they came through. I think it helped that I had received a better package from another school, and that he was in sales and used to pitching people! But it underscored to me that being proactive in these bureaucracies can sometimes pay off. Good luck OP.

[Anonymous]

No. You should be responsible for some amount based on your income and savings. Your DD is responsible for the rest with loans and work-study.. If the schools she applied to are too much, then she doesn't go. Start at community college and work for a year before transferring. Or take a gap year. It sounds like your daughter missed the idea that your safety schools need to include financial safety.

[Anonymous]

Anonymous wrote:OP -- no. You must not use your home equity or savings to pay for your daughter's college.

Have her take a gap year this year and work. Research colleges that may offer better aid. Send her to community college and live at home. Do whatever you can to have her get through college with no debt. That is the best gift you can give her.

+1

She should do community college while living at home for two years, then transfer to a local state school. She should keep living at home if that is necessary to avoid or minimize student debt.

Do not touch your home equity.

[Anonymous]

Here's a discussion on College Confidential for a student in MD who had mediocre SATs and GPS in Maryland and was finding it hard to get into a college that would also offer need based aid.

https://talk.collegeconfidential.com/financial-aid-scholarships/2007543-high-need-met-colleges-for-b-students.html

Basically, you need to be very strategic. Your child might benefit from some more SAT prep and retaking the SAT to get a higher score; taking some courses at a community college to improve her chances and then transferring into a state school. Living at home on in a cheap apartment if need be but whatever you do DO NOT let her go into debt or let you take on debt, or fail to plan for your own retirement.

[Anonymous]

Anonymous wrote:My parents took out a second mortgage to pay for my college (second of three kids.) I did really well in school and received increasing amounts of aid, plus my father's career boomed in his final years so it wasn't a burden to them. I did work study, worked as a waitress & at a Costco in the summers, graduated with loans as well and had a very keen sense of how much had been invested in getting me to where I was. I'm forever grateful to my parents; but I also know my situation was really, really lucky. I don't know if it was sensible for my parents or for you OP.

One small piece of advice though -- before I committed to a school, my father went back to the school to ask for additional aid and they came through. I think it helped that I had received a better package from another school, and that he was in sales and used to pitching people! But it underscored to me that being proactive in these bureaucracies can sometimes pay off. Good luck OP.

The economics of paying for college have changed dramatically in the last couple of decades.

[Anonymous]

Anonymous wrote:. I have always been a single mom with no college degree and she is an only. Is this what families do to make college a reality for their kids? Which undergraduate degree/ field of study is worth this type of investment? I would hate to sink all my money and access to money into a degree only to have her come out and get a $40k annual salary job where she needs to work for 6 years before she can reach something better paying. How do families guard against that?

Good rule of thumb is not to take out any more in debt altogether, than your child can expect to earn her first year on the job with the degree she earns. If her degree doesn't prepare her realistically for any kind of a paying job, that means NO DEBT.

What are her interests? I mean, if she wants to study cybersecurity she can pretty much be guaranteed of a decent salary right out of the gate. And there is money available for scholarships:

https://aces.umd.edu/sfs

[Anonymous]

OP -- no. You must not use your home equity or savings to pay for your daughter's college.

Not borrowing from home equity, which is a loan against an asset is one thing. But not using any savings to pay for college? Really?? Colleges do expect something to come from savings (and indeed there are special savings accounts for the purpose of college). Financing college entirely out of income is not typically enough.

As for OP, I suggest looking for another way, a cheaper school, commuting to a regional state university if there's one nearby, etc., unfortunately. Get the cost down first. Ultimately, evaluate the source of funds from the choices you have available and their various costs, but intuitively, it just unlikely that home equity is the best strategy. If you were to use only income and available cash, what would be a feasible cost of attendance, annually?