If you own a home, your equity in it may be one of your largest assets. Home equity loans and lines of credit are a valid means to pay educational costs for either you or your children. It also may offer a more attractive alternative than liquidating part of your investment portfolio or borrowing against your retirement savings. For instance, if you sell your investments you may be foregoing returns that can be higher than the after-tax cost of a home equity loan (particularly if you end up paying a capital gains tax). Before deciding, it is important to determine the real, long-term cost to you of selling investments vs. a home equity loan or line of credit.
Since your home acts as collateral, it is probable that you can find an equity loan that offers lower interest rates than an unsecured, private student loan. And the interest you pay on this loan may be tax-deductible (check with your tax advisor). Please visit IRS Publication 936 (Home Mortgage Interest Deduction) at the following web site: www.irs.gov/pub/irs-pdf/p936.pdf and go to page 8 for additional information.