According to the U.S. Department of Education, the average cost of tuition at a four-year private college or university averages about $15,000 a year. Factoring in other miscellaneous costs such as room and board, the number can soar to more than $20,000.
SOURCE: U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education Data System (IPEDS), "Fall Enrollment" and "Institutional Characteristics" surveys. (This table was prepared September 2000.)
"Some consumers are forced to dip into their savings or investment portfolios to pay for their child's college expenses. However, many consumers' portfolios have declined because of the poor performance of the stock market. Pulling money out now may not be a viable option for them," said Jay Farner, Vice President of Online Lending at Intuit's (INTU) Quicken Loans, a leading online mortgage lender and the 27th largest retail mortgage lender in the U.S.
"Consumers with good credit could consider obtaining a home equity loan to help finance educational goals. With the prime rate down, they could be eligible for rates as low as 8 percent," said Farner. "They may find the interest rate on a home equity loan to be competitive with other college financing options, especially if you consider the after tax advantages. Interest on home-equity borrowing of $100,000 or less is often tax deductible."
For example, a consumer who gets a $50,000 home equity loan with a 10-year fixed mortgage rate of 9 percent pays $633.38 a month, which equals $7600.55 in out of pocket expenses a year. Assuming a 33 percent tax bracket, that consumer would pay $4368.85 in interest, which would in turn give back the consumer $1441.72 at tax time. So, after taxes, the consumer is really only paying $6158.83 a year, or $499 a month. In essence, the payment on that $50,000 10-year fixed loan after the tax deduction carries a rate of about 6.03 percent for the first year. Consumers should consult their tax advisor to see if they qualify for a tax deduction.
Some consumers pay off their own student loans by refinancing or getting a low interest home equity loan. Wilson Blackwell, an engineer in Huntington Beach, Calif., did just that earlier this year. Blackwell already had a mortgage and a home equity line of credit and wanted to pay off $35,000 in student loans. With interest rates at 30-year lows, Blackwell refinanced through Quicken Loans at 6.87 percent, using the equity in his home to help pay off his student loan, which saved him about $400 a month.
"The rate on my previous second mortgage seemed to climb every 6 months or so," said Blackwell. "I knew that interest rates had gone down, and I wanted to lock in a better rate to help me pay off my student debt."
Quicken Loans offers a number of home equity loans that can help consumers get the financing they need in as few as three days, with rates as low as 8 percent. Some home equity loans require no income statements from the consumer and use state-of-the-art technology to get automated appraisals. "This enables us to give consumers the financing they need in as short as three days," said Farner. "A consumer's credit report can be pulled online, leaving only the title search, which usually takes only two to three days."
The calculators and tools in the Quicken Loans Home Equity Center at www.QuickenLoans.com can help consumers calculate their savings and determine if a home equity loan is right for them.
To learn more about how to finance your educational goals, mortgage consumers can visit the Home Purchase and Refinance Centers at www.quickenloans.com. Both contain educational content explaining the mortgage process and calculators that can help consumers calculate the amount of home they can afford based on today's rates, or the potential savings achieved by refinancing.
1 Preliminary data based on fall 1998 enrollments
MEMO to Editors: Quicken Loans officials are available for interviews. Quicken Loans can also help you obtain interviews with recent customers. Contact Elizabeth Jones at 734/805-7137 or via e-mail at Elizabeth_Jones@QuickenLoans.com or Claudia DeMordaunt at 734/805-7977 or Claudia_DeMordaunt@QuickenLoans.com.
About Quicken Loans
Quicken Loans (previously known as Rock Financial Corp., owner and operator of RockLoans.com), a leading provider of direct-to-consumer home loans on the Internet, offers mortgages in all 50 states and the District of Columbia. The company provides a wide variety of home financing options including conventional, sub-prime, home equity, government and jumbo loans.
Quicken Loans combines cutting-edge technology and high touch personal service to give consumers a convenient one-stop home and mortgage experience on the Internet. More than 680 experienced loan professionals located in the Quicken Loans' state-of-the-art Web Center work directly with consumers throughout the entire process, while the Web site educates and empowers consumers through timely interactive tools and information related to the home financing process.
