Many parents tap into their home equity to raise college cash. Financial advisers say that's a good plan if:
• You don't think you'll need the home equity for some other reason (such as funding retirement) or an emergency.
• Your home equity loan payments will be tax deductible, while your PLUS loan payments won't be. Note that in many cases, non-housing-related uses of home equity are not tax deductible.
• You're offered a lower rate on your home loan than the PLUS's effective maximum APR of 9.5 percent (check your own PLUS rate, because some PLUS lenders charge less than the maximum). Remember that the PLUS rate is fixed, while many home equity lines float with interest rates, so while the mortgage might look cheaper initially it may cost more if interest rates rise—which they often do.
• You've been rejected for a PLUS.
• You think bankruptcy might be in your near future.