Need tuition? Don't count on home equity loans

[RamboLiberal]

Source: Pittsburgh Post-Gazette

With colleges gearing up for a new school year and tuition continually on the rise, turmoil in the mortgage industry could not have come at a worse time for families planning to use home equity to finance higher education costs.

Home equity loans have for years been a viable last resort for parents who have been either unable or unwilling to save for college. A bull market in housing kept prices steadily rising, making banks happy to lend money against the increase in home values.

But this month, as thousands of American families begin paying for college tuition and expenses for the fall semester, the current mortgage crisis stemming from massive defaults in the subprime mortgage market is making it harder to tap a critical source of cash.

National City Bank's home equity unit last week said it no longer would accept applications for home equity loans or refinancings. And while other banks have not publicly stated a deferment on such second mortgages, many have internally tightened their credit policies, creating the same net effect.

"I'm sure there are people out there not able to send their kids to college because of this," said Dr. Susan Wachter, a real estate economist at the University of Pennsylvania's Wharton School of Business. "The home has been used as a piggybank to save and spend. There's an assumption that housing prices do not fall."


Read more: http://www.post-gazette.com/pg/07229/810243-298.stm

[villager]

1. And, Dr. Wachter, what about the assumption that tuition should keep rising, indefinitely?

n/t

[mrreowwr_kittty]

2. Sad to say, but I think that's a safe assumption

Barring a massive investment by our government into providing free or low-cost college educations to our citizens, I wouldn't expect a reduction in the cost of tuition.

[villager]

3. the fact that it will, or might, is different from the assumption that it *should*

n/t

[OzarkDem]

4. I agree

Since my kids began attending college, I've noticed how much more "posh" campuses are today compared to 30 yrs. ago. Its nice, but some of it seems a little extravagant. Every campus I went to with the kids had major construction projects underway for buildings that would fit in the campus of any Fortune 100 corporate headquarters. Private airports and private jets for administration and faculty seem a little over the top.

Isn't also true that in many universities with large sports programs, they don't really pay for themselves?

The seemingly endless flow of federal money into student loans programs spurred a lot of unsustainable expansion and tuition increases.


No doubt there's a lot of belt tightening that could go on.

[fasttense]

5. Wow, I don't know what campuses you looked at,

but the ones here in TN were no better than what I had in 1975. In fact many buildings were built in the 70s. Yet their tuition keeps rising and rising...

[Quantess]

14. The Oregon college campuses are meager,

and tuition keeps rising and rising.

[1932]

8. Which university has a private jet and airport for administration and faculty?

[OzarkDem]

9. Ohio State n/t

[1932]

10. Doesn't Ohio State have a big aviation program?

It's not exactly a luxury item for them. They have an academic aviation program. It would be a waste of money to say the school couldn't use resources and facilities they owned.

[OzarkDem]

11. Maybe

the aviation program is a luxury item, then, especially if it isn't paying for itself.

The rapidly rising cost of higher education in Ohio is not sustainable. Its not serving its own citizens very well as more lose jobs, incomes drop and higher education grows out of reach of most middle class Ohioans.

[1932]

12. Is a teaching hospital a luxury item?

Aviation is an importatn part of the US economy. I'm glad a good university like OSU has a program and is training and researching in that field.

[1932]

7. Actually, I think that just as home prices will drop now that it isn't possible

to buy a house with no money, tuition will drop when it isn't possible to get a student loan so easily.

[1932]

6. What incentive is there to lower tuition when banks have been so willing to extend credit?

Just like the way easy-to-acquire mortgages drove up house prices, easy-to-acquire student loans ensures there's no downward pressure on the price of education.

[Xenotime]

15. She is done with school so she doesn't have to worry about it.

[AlCzervik]

13. i won't be counting on a home equity loan--i'll be selling my house.

thats what it's come down to really, selling the house and finding an apartment to rent. I'm kind of looking forward to not being a homeowner is a strange way. We bought for $209,000 in 2000, we put $50,000 down and took out a 15 year fixed, at this point i'd be happy to just have the down payment pack.

[Xenotime]

16. That's really sad to hear...

It seems this administration is driving people out of their homes causing the rich to get richer.

[AlCzervik]

17. i count myself lucky, at least i have that option of selling.