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If you've exhausted all of the resources that we've covered so far and are still coming up short, you can borrow against some of your assets to generate the cash you need. Keep in mind though that these plans were designed for another purpose all together, and that tapping into them for education may jeopardize your security elsewhere. The most common sources of this kind include:
Let's take a closer look at each.
Home equity loans
Students or families of students who own a home can borrow against their house to pay for college. - In most cases, they can borrow up to 80% of home's equity.
- The interest on home equity loans up to $100,000 is tax deductible.
Loans against retirement plans
If you have a 401(k) or some other qualified retirement plan, you can often borrow against your savings in order to fund you or your child's education.- You may borrow up to fifty percent of your account's assets up to $50,000.
- Generally, this loan must be repaid with interest over five years.
- The interest on your loan is typically paid back to your own account, so you are not losing that cash to an outside supplier.
- You will pay taxes both on your loan and on the interest earnings once you go to cash out your plan.
Borrowing against life insurance
Any student or family of a student can get a loan by borrowing from the cash surrender value of most life insurance policies. - Should you do so, you will not incur any tax on amount received.
- Interest rates will vary depending on the age and type of policy.
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Budgeting