<p>Just am curious what everyone's opinion is on the subject of PLUS loans vs. using a HELOC if you are still lucky enough to have one! Used to hear "do not put your house on the line--use loans, regardless of the tax deduction". What about in today's economy with PLUS loans at 8.5% and HELOC's near 3-4 %? I hope to have my D use the Stafford loan first, with the understanding that I am planning to pay it back for her. Then if I need more, I am torn between the PLUS and the HELOC. Any suggestions?</p>
<p>My stance was to use the PLUS just in case you need the HELOC for other things. You can always use the HELOC to pay of the PLUS but can't go the other way. HOWEVER, with the way things are going thes days, I am inclined to pull out every penny from my HELOC so that it does not get yanked from under me when I need it. I know too many people who have lost their HELOCS for adverse credit reports, house depreciation or for really no reason than a jittery bank. They are now being very picky about giving big HELOCs at low interest rates. I would pull that money out and bank it!</p>
<p>I would use the PLUS but the reality is, I would not borrow to pay for college, really. I am an older parent and this is a scary economy. D received a very do-able aid package from a smaller state university that does not have any loans. She has a small job to bank some money for her expenses. I understand cptofthehouse's advice re HELOCs. </p>
<p>There is always community college.</p>
<p>Tough call. It might depend upon how many years you have left on the HELOC. If you draw now, when will it come due? Drawing now does lock in your financing. No guarantees it will be around later. I may even be inclined to take out a first mortgage at today's low rates. HELOC's tend to be floaters, so interest will go up when interest rates go up.</p>
<p>We used PLUS for first time for D. We have opted to defer payment as long as she is in school but pay the interest on it now. Our long term plan is that we will probably sell our house in 4 to 5 years and pay it off. THe terms for plus are very loose. You don't need stellar credit and there are provisions for forbearance and forgiveness in economic hardship, death etc. It just seems like a better option and I agree that it would be better to use a HELOC or refinance for emergencies or other things.</p>
<p>We use a HELOC that we opened more than a year ago. And we decided to pay only interest becasue the value had gone way up. Of course our house value and our debt are rapidly coming together due to the economic downturn. We plan on selling the house in by the end of 2009, or should I say planned. We may just refinance the whole thing and stay if it is cheaper and we would lose on the sale. So the decision made in late 2007 might not be the one we would make in early 2009. I have always refused to carry any debt other than our mortgage, but private college bills certainly make one revisit these beliefs. But the rates on education loans are ridiculous when compared to what you can get with a HELOC, and of course the deduction. It is a difficult decision, but in a nutshell, I think a very important factor is how long you plan to stay in the house.</p>
<p>We have used the HELOC for small amounts for university and then applied ourselves diligently to paying it off by the end of the school year. With rates at 2% or so, it is not that costly and seeing the stmt each month is motivates us much more than a student loan would, to pay it down/off as soon as we can.</p>