<p>Wow, I never heard of a HELOC being callable either. I would be screwed in a major way.</p>
<p>Generally only the interest on $100,000 above what is used to buy or improve your house is deductible (as long as the total of all mortgages doesn’t exceed the market value of your home). So if you have to borrow a lot for college, you might not be able to deduct all of the interest. And if the value of your house has fallen substantially you may not be able to deduct it either. There may also be AMT considerations.</p>
<p>The down-side with using a HELOC is that now you’ve put your home on the line. If for some reason you can’t make the payments (loss of job, disability, death, etc) you can lose your house.</p>
<p>So you have to decide if saving some interest is worth the risk.</p>
<p>A safer, although more expensive strategy might be to co-sign loans, and help your kid pay them off. If the loans aren’t forgivable in the event your child dies (I know, who wants to think about that?) look into getting a cheap (like < $100/year) term-life insurance policy to cover the loan balance.</p>