What if you haven't been investing regularly for your child's education
or your investment plan is falling short? You may need to borrow. A
variety of government-subsidized and unsubsidized education loans are
available to students and parents.
Interest paid on qualifying student loans is tax deductible. Another
strategy used by many parents is a home equity loan. With a home equity
loan, the interest you pay on the loan also may be tax deductible.
You also might consider a loan from your employer-sponsored retirement
savings plan. Or you may be able to take penalty-free withdrawals from
your individual retirement account to pay for qualified higher education
expenses incurred by you, your spouse, your children, or your grandchildren.
Be aware, though, that you may have to pay federal income tax on some
or all of the money withdrawn from your IRA. And use caution when borrowing
or withdrawing money from any retirement account. You don't want to
short-change your retirement.