<p>I'm looking for advice here--we need to fund almost all of my D's tuition (150K). I have equity in home, but most of my friends say that they still took out PLUS loans. The rates seem to now be about the same. PLUS rates are now being capped at 8.5% and equity loans are prob. same or less for a fixed 15 year rate. Can anyone tell me why PLUS seems to be preferred method?</p>
<p>One advantage of a PLUS loan is that the loan is federally insured against the death (and disability, I think) of the student or parent. If at sometime in the future you wanted to pay off the PLUS loan with equity, that would still be an option. I don't know if you can apply for a PLUS retroactively.</p>
<p>Another reason I can think of is that a PLUS loan would be an unsecured loan -- i.e. no collatoral involved if one ends up not being able to make up payments ??</p>
<p>I am not an expert about this, but another thing to investigate is whether your child is going to a school where home equity is looked at for aid (usally profile schools, I think). If you take on the debt by reducing home equity this may help you get more aid. I guess this is also something to look at if you have younger child/children that might attend a school that considers home equity for determining financial aid.</p>
<p>Great advice--it makes sense to me now. Perhaps it would be best for us to take the PLUS loan, and pay it off with equity loan before my sons get to their junior year. Hopefully we'll get some help with my sons--we feel like we are the only parents paying "sticker price" for a student 2nd in her class with nearly perfect SATS!</p>
<p>I would just make sure that your family would not lose your home, if there is family crisis down the line-ie:job loss, illness, family emergencies. Many people do not take additional debt on their home for those reasons.</p>