First to set the stage.
- We have two kids one starting school this fall and another following in two years.
- As a family our income is high enough that we do not qualify for any aid.
- We also make too much to claim any education related deductions.
- We are very asset poor, little savings, I'll explain below.
- We have about $30k in usable equity in the house.
- We are looking at $20k of education expenses per kid per year.
- We are planning on contributing $12k per year and then have our kid cover the rest in loans.
- We are basically taking $1k out of the family budget and sending it to the university.
The options I see:
At this point we do not have the cash on hand to cover the costs of Progeny #1, but we have been offered a Parental Student Loan to cover all of her costs. But I wonder if using the house might be a better idea, here is what I see as options:
Take the parental student loan
- I don't like that this debt
- Student loans cannot be discharged (god forbid something happens)
Get a HELOC
- Five year term for borrowing
- Pay tuition then pay down every month (works with the budget)
- Interest might be deductible
- Feels like less debt
Take out a 2nd Mortgage
- Cheaper interest rate
- Need to take all at once
At graduation I would like to think that we had payed off all of the debt associated with their schooling (on our part). But, I am also a realist and know with all the best intentions how easy it is for us to screw things up.
We are in kind of a uncommon situation, now both my wife and I are making good salaries and are now climbing up to a point of zero net worth. We should be further ahead at this point looking at what we make, but the great recession hit us hard and then one of our kids got very ill. Not all the treatments suggested by the doctors were covered by insurance, so we paid for them out of pocket.
The good news is that one of those treatments finally worked and we have our kid back! It only took everything we owned, and I would do it again tomorrow in a heartbeat. That is also how I know we can cover the $1k a month for college, that is money we are paying on medical debt that will be payed off and we can then redirect to other things.
I appreciate the suggestions about community college and other ways to save money. But, I would really like to limit the suggestions to the question on hand. Both my wife and I are in "high skill" educated jobs and I see how the school pedigree sets a person's life long trajectory. In my mind the local state university is pretty close to the knee on the cost/value curve and we are willing to sacrifice to support that choice.