How to use a HELOC to pay for college

By Kassondra Cloos | Published on March 9, 2026

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As the cost of college continues to rise, families are looking for creative ways to finance education. One option that some homeowners consider is using a Home Equity Line of Credit (HELOC).

While a HELOC can provide access to funds, it's important to weigh the pros and cons of using home equity for education costs versus other financing options like parent loans¹, cosigning student loans, or more traditional education loans.

What is a HELOC, and how does it work?

A HELOC allows you to borrow against the equity in your home, which is the difference between the home's market value and the amount you still owe on your mortgage. It functions much like a credit card, where you’re approved for a maximum limit and can borrow as needed, repaying over time. Since HELOCs typically have variable interest rates, your payments could fluctuate depending on the loan terms and market rates.

Pros and cons of using a HELOC for college

Pros:

• Lower interest rates: According to Comerica, since HELOCs are secured by your home, they often offer lower interest rates than unsecured personal loans or credit cards.

• Flexible repayment: Most lenders require monthly payments but some offer flexibility for HELOCs (like bi-weekly payments), which can provide flexibility if tuition and other expenses vary from year to year.

• Tax benefits: In certain cases, the interest paid on a HELOC may be tax-deductible, though this depends on current IRS rules and how the funds are used.

Cons:

• Risk of losing your home: If you're unable to repay the HELOC, you risk foreclosure. This can add significant stress when balancing other financial commitments.

• Variable interest rates: While initial rates may be low, most HELOCs generally have variable rates, which means your payments could rise over time.

• Temporarily tying up home equity: Using your home equity for college expenses could limit your ability to borrow for future needs, such as home improvements or emergencies.

HELOC vs. parent loans

A more traditional option for parents financing their child’s education is taking out a Parent PLUS Loan. Unlike a HELOC, Parent PLUS Loans are specifically designed for education costs and are unsecured, meaning your home isn’t at risk if you can’t make payments.

Key differences:

• Risk: Parent PLUS loans do not put your home at risk, while a HELOC does.

• Fixed vs. variable rates: Parent loans typically have fixed interest rates, so your payments remain stable, whereas HELOC rates can fluctuate.

• Repayment flexibility: Parent PLUS Loans offer deferment options while your child is in school, and there are income-driven repayment plans*, which may not be available with HELOCs.

* As a result of ongoing court actions, the terms of some Income-Driven Repayment (IDR) plans, including the SAVE plan, may be subject to change. Please refer to studentaid.gov for the current status of these plans.

HELOC vs. cosigning a student loan

Cosigning a private student loan is another way to help your child afford college. When you cosign, you take on legal responsibility for the loan if your child cannot make payments. Unlike a HELOC, cosigning does not require using home equity. However, it can still affect your credit if the loan is not repaid on time.

Key differences:

• Credit impact: Cosigning a loan can impact your credit score, and missed payments will affect both you and your child’s credit. A HELOC, on the other hand, only affects your own credit.

• Flexibility: A HELOC may provide more flexibility since it can be used for any cost of living expenses, such as traveling home on the holidays, entertainment, or gym memberships, not just tuition. Cosigned student loans are typically limited to education costs.

• Interest rates: Private student loans may have higher interest rates than HELOCs, depending on creditworthiness.

Other options to pay for college

In addition to HELOCs, parent loans, and cosigning, there are other ways to finance a college education, including:

• Scholarships and grants: Free money that doesn’t have to be repaid. It’s worth the time to research and apply for these.

• Federal student loans: These loans generally offer lower interest rates and more favorable repayment terms compared to private loans. Students can access Direct Subsidized and Unsubsidized Loans without needing a cosigner.

• Private student loans: If federal loans, scholarships, and grants don’t cover the full cost, private loans can fill the gap. Just be mindful of interest rates and repayment terms.

Weigh your options carefully

While using a HELOC for college might seem appealing due to its low-interest rates and flexible borrowing, it comes with significant risks, especially when compared to other education-focused financing options.

Parent loans and cosigning student loans are alternatives that may be safer for your family’s financial health. Before making a decision, it's important to evaluate all options, considering both short-term affordability and long-term impact.

If you're exploring ways to pay for college, consider a parent loan or cosigned student loan through a trusted lender like Earnest. These options are designed with education costs in mind and may provide more stability and peace of mind.

Explore more about student loan options at Earnest.

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About the Author

Kassondra Cloos

Kassondra Cloos is a writer, editor, and former Earnest client. She refinanced her own student loans with Earnest after graduating and has first-hand experience with the refinancing process. She has been writing about personal finance and student loans since 2017. She also writes about sustainable travel and adventure for The Guardian, Outside, Backpacker, and many other publications. You can find more of her work via her travel newsletter, Out of Office.