What About Loans?

Tax Credits Created by congress, the Hope Scholarship provides a tax credit based on the family's income and the tuition the family pays. Qualified families may claim up to $1,500 as a tax credit. In addition, the Lifetime Learning Tax Credit is available to individuals who file a tax return and owe taxes. Depending upon your income, your family may claim a tax credit of up to $1,000 per tax year (increasing to $2,000 in 2003). For details on your eligibility, check with your college's financial aid office or the IRS.

This is where we get to the "paying for college after graduation" part -- and that means borrowing. Borrowing should always be a last-resort method of paying for college. That said, borrowing can and should be used to close the gap between the resources available to your family and the cost of the institution your student deserves.

For many families, the equity in the home represents the largest "savings" account. If your home has equity value, you should consider using it to pay for college. Although not always true, home-equity-loan interest rates are often lower than those charged by commercial loan sources. Additionally, home-equity-loan interest is tax deductible, which further lowers the cost of attendance. Equally as important as low interest is the fact that home-equity payments can be extended over a longer period than just the four years of enrollment.

There are, of course, student loans and parent loans -- both of which are becoming more important all the time as families try to pay the rising costs of higher education.