If you've been watching college prices rise in an almost exponential manner since your teen was in elementary school, you may be worried about how he or she will ever be able to afford four years of tuition, food, and housing costs without being able to work a full-time job. Not wanting your young student to begin his or her career burdened with hefty student loans, you're likely considering helping shoulder some of the cost -- but you may lack the cash flow or college savings account balance to write a tuition check each semester. Should you tap into the equity you've built up in your home to help get your child launched into the world with a college degree? Read on to learn more about some situations in which this may be your best college financing option, as well as other cases in which you may want to keep your equity intact.

When is it a good idea to use a home equity loan for college costs?

Interest rates for mortgages and home equity loans have been at record lows for several years -- and with interest rates for federal parent Plus loans at nearly 7 percent (and likely to rise in the future), taking out a fixed or adjustable rate home equity loan instead of a Plus loan may allow you to pay significantly less in interest over the term of the loan. 

A home equity loan can also be a beneficial option when you find yourself in dire financial straits. Most student loans are not dischargeable in bankruptcy -- which means that if your income or employment situation changes after you've taken out this loan, you'll be unable to free yourself of this financial burden. On the other hand, a home equity loan can sometimes be "stripped" by a bankruptcy court, helping you achieve a fresh start after some tough years.

When may you want to investigate other options instead?

If you and your spouse are nearing retirement age with a sizable mortgage and planning to downsize soon, tying up your home's equity in college costs may not be the wisest idea. If the housing market in your area declines just as you're preparing to sell, you could find yourself scrambling to come up with extra cash to bring to the table to cover closing costs. 

And for situations in which your budget has little wiggle room, you may also want to carefully consider a fixed-rate home equity loan rather than an adjustable-rate loan. This will ensure a fixed, regular payment that won't fluctuate with rising interest costs. For more information, talk to a company like MCS Bank.