First to consider is whether home equity is a hindrance to financial aid. The answer is... that depends. It turns out that 90 percent of private colleges do use home equity in determining financial aid, while 98 percent of public colleges do not.
And there is also another potential relationship between home and college – using home equity as a resource to pay for college. For years, during the boom real estate market, many homeowners treated their residence like a credit card, borrowing money against the equity in their home and hoping it continued to escalate in value. That notion came to a crashing halt after the fall of 2008 when the real estate market reversed and unemployment rose. Then, the easy-breezy borrowing of home equity came under scrutiny.
These days, people are rightfully more cautious about borrowing home equity in order to pay for college bills, and sound college financial planners warn parents against jeopardizing their own financial future by over-borrowing home equity. While your child has enjoyed the security of home in the past, and until the time he or she flies out of the coop to head to college, it’s important for you to manage your finances to ensure the surety of your home as collateral for stability in your future.