Refinancing to Pay for College

A college education isn’t inexpensive in the United States, and a prospective student faces the prospect of taking on a very large amount of debt in the form of student loans, as do their parents if they wish to contribute toward paying tuition.

Many people consider refinancing their home for the sake of paying for education. If refinancing is the right option for you, a loan consultant from Great Northern Mortgage can help walk you through the process. There are other options to consider first, however:

Financial Aid

Scholarships and grants are available for a wide variety of circumstances beyond the tried and true academic and athletic scholarships. You may be able to find sources of assistance you didn’t know existed.

Need-based financial aid based on low income is another option, if you qualify.

Financing and Earned Money

Federal and private loans

Work study programs

If the options above aren’t feasible for you, you may want to consider refinancing with a cash-out refinance.

Advantages and Disadvantages

Advantages

• A cash-out refinance gives you a large lump sum of money to put toward education expenses
• The cash-out refinance rate may be lower than other loan options available to you
• It may be possible to get a tax deduction. Consult with a tax advisor

Disadvantages

• The proceeds from a cash-out refinance negatively impact a student’s ability to qualify for the maximum amount of FAFSA, due to the parents showing too much income as a result of the refinancing
• Using your home’s equity to pay debt puts your home at risk if you are unable to make payments, so it’s important to ensure your refinance has favorable terms
• The costs associated with refinancing can place strain on your finances beyond just the education costs you are attempting to cover.