19 Jul Should we take student loans or use home equity for college?

Q. We have saved money in a 529 plan, but not enough to pay for all four years of college. We could take student loans, or we can use a home equity loan for the rest. What’s the best way to go?
— Mom

A. Paying for college can be pretty painful.

But it’s great that you’ve at least saved some.

Most advisors would say you should use the 529 plan first. This way, if you eventually have to borrow, you’ll have less time that the loans will accumulate interest.

Plus, it’s possible that your financial situation could change, and maybe there’s more cash available to pay for the later years of college.

While using home equity may be tempting, take a look at your interest rate options. In recent months, they haven’t been pretty.

Plus, you don’t want to risk your home over a college education if you get into money troubles down the road.

Student loans, which have favorable repayment terms based on your student’s income after they graduate, may be a better option. They also may have more favorable interest rates.

So start with the 529 plan, but talk to your child’s financial aid office about borrowing options for when you need the money.

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This story was originally published in July 2026. 

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.