Susan Tompor: Students Aren’t The Only Ones Crushed By School Debt

Yet there is another point to consider: The Tax Cuts and Jobs Act of 2017 ended some income tax deductions for home equity lines of credit.

Interest on home equity loans will no longer be deductible beginning in 2018, if the loan was used on things like paying for college tuition, taking a vacation or buying a new car.

The interest on that home equity loan would still be deductible if the money goes toward building, acquiring or substantially improving the home.

If parents don't get a tax break any longer, tapping into home equity would become a less attractive way to pay for college.

"Between rising interest rates and the loss of tax deductibility, home equity lines aren't the low cost source of capital they had been," said Greg McBride, chief financial analyst for Bankrate.com.

Even so, rising home prices are increasing, and parents could borrow against the house or refinance to take cash out of the home, too.

"Would-be borrowers often look at home equity as 'found' money when access to cash is needed," McBride said.

-Does every parent qualify? The good news is a parent can get the federal PLUS loan even with a lower credit score. But you need to expect a credit check.

A PLUS loan will be rejected if a parent has an adverse credit history. Under the regulations, someone could be denied a Parent PLUS loan if he or she has a current delinquency of 90 or more days on total outstanding balances of greater than $2,085.

Other adverse events include a bankruptcy discharge, wage garnishment, tax lien or foreclosure during the five previous years.

There are various ways to still apply, such as getting someone other than the student to agree to repay the loan if the borrower does not repay it. And there are ways to appeal regarding extenuating circumstances.

Another thought: If a parent is denied, a dependent undergrad would become eligible for higher Stafford loan limits.

More students are taking advantage of the extra limits, according to Kantrowitz.

About 7.4 percent of students benefited from the higher limits after their parents were denied PLUS loans in 2015-16. That's up from 5.8 percent in 2011-12 and 3.3 percent in 2007-08. ___ ABOUT THE WRITER Susan Tompor is the personal finance columnist for the Detroit Free Press.

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