Paying for college with a HELOC

[VagabondMD]

My good (nonphysician) friend told me today that he is stilling paying off the debt from his child's college expenses, via a HELOC. (His son graduated about 5 years ago.)

I am not a big fan of using the HELOC to pay for college. If money must be borrowed to pay for education, I believe it should be on the student, who has a lifetime to pay it back. If the parents have the ability and want to make the loan payments, great. If something happens to the parents' earning ability, the son can assume the payments. With the HELOC, if something happens to the parents' earning ability, they could potentially lose the house. I understand that the interest may be deductible, but is it worth the risk? Or am I too cautious? What am I missing here?

[Kamban]

Maybe he has the money already available as a lump sum to pay for the college but is investing in other areas that gives higher rate of return. He borrows from HELOC at lower rate of interest which is also interest deductible.

[jfoxcpacfp]

Maybe he does have all his bases covered and a plan in place that he worked out with his CPA or planner and there are some pieces you're not aware of. I don't think you're being too cautious in general and I'm not a fan of a parent mortgaging their house to put their kid through college - it smacks of desperation and poor planning. Hopefully there is more to it than meets the eye, though.

[TheHappyPhilosopher]

I'm gonna take a stand on this one and say this is a terrible idea. There are just too many things that can go wrong here. If loans are needed the student should take them out. Period. The parents can choose to pay off the student loans at some point in the future, but never to take out another loan. If this was the idea of a financial planner they should be fired immediately.

Did I mention I'm not a fan of this?

[Hatton]

It is just too complicated.  If he failed to save enough for college then do student loans.  People try to be clever and end up in a mess by kicking the can down the road.