Do you have eligibility to roll over 401k funds into an IRA, and are you getting need-based financial aid? IRA withdrawals for qualified education expenses are not subject to the 10% penalty, so you could skip the loan entirely.
The trick is that the withdrawals are taxable and contribute to your AGI, and increase your EFC. For a school that uses the CSS Profile and meets full need, you may be able to explain this, but for a school that uses a straight FAFSA EFC you might lose aid.
If you have a lot of equity in your house, have you ever considered selling it and downsizing and then just flat out using the equity? I do know two families doing it locally, but we live in a school district with a huge range in socioeconomic status, so they can downsize and still say in the same school district. I know it won’t work for everyone.
Thanks all for the responses to this thread. I want to update you on the outcome. The very good news for our daughter is that her first choice private school came through with a grant that is phenomenal and a solid $10,000 per year less expensive than our in-state public schools. I don’t think we’ll need more than the available federal student loans at least until our son goes to school.
Congratulations! That’s great. FWIW, we’ve had great success using our HELOC to manage our daughters’ tuitions. We looked at the terms, considered worst case scenarios, and they were not catastrophic. We’ve been using it as more of a cash flow vehicle and have been paying each year off within about a year just from our regular income, but if we hadn’t been able to a few years after graduation wouldn’t have been the end of the world.
Also, when I was initially running the numbers on this, I had a “duh” moment about the paying it back. I forgot for a little while that once my kids graduated I wouldn’t have the actual monthly tuition to pay, and therefore would have all of that money to put towards any borrowed HELOC balance. Considering I do spreadsheets with financial projections for a living that’s when I knew it was time to step away from the computer for a while. 