<p>The other advantage of home equity loans for those whose kids go to college that requires profile and counts home equity in assets, is that as you deplete than number each year, you bump up your financial aid eligibility. Particularly useful for areas where the home values go up a lot. If you are on the tail end of being eligible for financial aid, or have another kid coming up for college as well, dipping into home equity reduces your assets when assessing your need. And remember that you can take PLUS loans retroactively.</p>
<p>As someone who always considers the worst possible case, I like the fact that PLUS loans offer protection against disability and death while also having an interest rate cap while also not putting my home on the line. The tax advantages of the home equity lines are a plus but not enough in my opinion to outweigh these other factors.</p>
<p>Jamimom-</p>
<p>You can take PLUS loans retroactively?
We are using HELOC now and might want to do the PLUS route later.</p>
<p>There have been changes in PLUS this year, so do verify, but yes, you can. My friend with was just on the verge of financial aid when her first student went to college, but the home equity was one thing that kept her out. She took out a $100K home equity loan and used it to pay off some loans and the entire $45K that her D's cost of attendence was. She also took an additional amount out to prepay taxes and other items bringing the down the home equity hit by about $8K and that did net her a $5K grant, $1500 in loans, and $1500 in work study for her D, who then cut down on her school job to go to work study, reducing the EFC further. The third year, they had two in college, with a further reduced home equity and, they did very well with financial aid with two kids in private colleges. The way they handled the home equity and prepayments, netted themabout $30-40K over 6 years.</p>
<p>I just wanted to confirm that my credit union does offer a plus loan with NO origination fee, 3% cash value of the loan back at disbursement, discount for ontime payments and autodraft payments, and "forgiveness" of loan at $600. balance. So, those of you who are not members of credit unions, you might want to look into possibilities of joining those that have good deals such as this one. Often you just need to have a family member or relative employed by city, state, university, union, school district etc to qualify. That being said - we're still trying to pay our EFC out-of-pocket rather than using a home equity or PLUS loan. No vacation this year, and trying to cut back in every way possible. We're not making extra contributions to retirement, but we both have defined-benefit retirement plans at work, so hopefuly this strategy won't come back to haunt us!</p>
<p>You are lucky as I checked with my credit union and they don't offer PLUS loans</p>
<p>My bank has a special offer to open a home equity line of credit this month - no origination fees and so on, ability to fix rate a section, etc. Looking at the equity component, deductability of interest, and so on, seems to be the best option for us. Had a nice discussion about college admissions, SAT's, and so on with the loan officer.</p>
<p>Yes, what EconProf Said... that sounds right to me...</p>
<p>just a note to help clear up a couple of inconsistencies...</p>
<p>Annual PLUS limit is the Cost of Attendance (COA) less any other aid you or your child have received for that year only...so you can't use them to roll up other, older financing </p>
<p>Currently the rate is set in each July based on 91 Day T-Bill rate +3.1% but it is variable up to a cap of 9%...perhaps it will end up fixed in the Bush budget but I bet the reauthorization keeps it variable....it will likely be at 5.5% or so for this coming year...</p>
<p>We more-or-less have the finances for freshman sorted out but are a little panicky about how to pay for year 2 and would like to reduce our assets. </p>
<p>We have an existing home equity line of credit but need to know whether there is a particular date we need to use our line of credit to reduce our assets? That is, do we have to borrow money by 12/31/2005? Or, could we take the money out the day we file FAFSA and Profile? For that matter, could we theoretically borrow money against the house and invest/park it someplace until we need it? Thanks!</p>
<p>Bump, please! Still trying to find out if home equity loans need to be taken by 2005 year end or by date that FAFSA/Profile are sent. The goal is to reduce assets. Thanks!</p>
<p>I don't know if I filled out the forms correctly, but I entered my home equity as of the point at which I filled out the form. For Profile, this was October and for FAFSA, it was February. Hence, my assets differed on the two forms.</p>
<p>My understanding is that schools have some flexibility in how they count home equity. We received very different finaid packages for two LACs, and the explanation I was given was that home equity was counted more heavily at one than at the other. </p>
<p>I believe the PLUS rate for this year will be 6.1% (found the number web-browsing the other day). I was told it was based on the 91-day Treasury bill rate as of May 28th.</p>
<p>Home Equity vs Parent Loan, the thing with a home equity is that if you end up not being able to pay for your monthly payments you'll be out of luck, they'll take your house if you can't make the payments. </p>
<p>If you do a PLUS Loan they can't take your house and you can always deffer the payments. I say Plus is better, and if you go for certain loan providers like EFSI, they'll give you an interest rate discount of up to 2 percent of whatever the PLUS Loan interest is. And you can get credit for this to in your taxes.</p>