How to pay for college with your credit card

What if the most valuable thing about owning your home wasn’t the house itself? But it was how you could use it to pay for some of life’s biggest expenses.

This is Equity 101.

What college actually costs

After buying a house, sending a child to college is probably the biggest check most American families will ever write, and we’re not talking about a one-time thing.

In the U.S., the average private university tuition is $45,000 per year. Public in-state is around $11,950, and that’s just tuition. When you add housing, supplies and everything else, you’re at $30,000 a year for a public and $62,000 for private, every year for four years.

And those numbers have more than doubled since 2000, climbing about 4% every single year.

So how do people actually pay for this?

Of course, savings, financial aid and loans are some of the options that come to mind for most people, but there are options most families may not look at that could actually save you a significant amount of money.

Let’s dive in.

Federal loans: the usual starting point

Federal loans are usually the starting point and for good reason. Undergrad APRs are around 6.38% as of the date of this video. Parent PLUS loans are at 8.94%, and they come with real protections, too, like income-based repayment and deferment options, stuff that private lenders don’t offer.

But here’s the thing: Federal loans have a borrowing cap, and most families hit that cap. And when they do, they might get a private loan, and the interest on private loans can potentially run up to 17%.

Think of it this way: A $50,000 loan, at say, 14% over 10 years costs you roughly $93,000 by the time you’re done. You borrowed $50,000, but you paid back almost double. That’s the part that nobody puts in the brochure.

The option most families overlook: your home equity

But here’s where it gets interesting.

If you own a home, you may be sitting on more financial flexibility than you realize, and most people never think to use it for something like this.

U.S. homeowners collectively hold a record of around $17.8 trillion in home equity right now, and the average homeowner has around $213,000 in accessible equity. That’s money tied up in the walls of your house, and you can borrow against it without selling.

It’s called a HELOC, or a home equity line of credit.

And what’s great about a HELOC is that the national average HELOC APR is around 7.43% right now. The only thing is that traditional HELOCs can be slow, require tons of paperwork; they take weeks to approve and often require an appraisal.

A HELOC that works like a credit card

But what if your HELOC could act like a credit card, backed by your home and approved in as little as 15 minutes?

That’s the idea behind the Aven Home Equity Card. It’s the same concept as a HELOC, but it works as a Visa card. You can use it anywhere, including eligible tuition payments.

Rates on the Aven card currently run as low as 7.49% for qualifying borrowers. Compare that to the average credit card APR of 21.52%, and that’s a huge difference! And you can earn unlimited 2% cash back on purchases.

That’s the difference between paying roughly $10,000 a year in interest on a $50,000 loan versus only $3,500 to $4,500.

Instead of taking a private loan out at 14% APR, a homeowner might be able to borrow at roughly half that rate. And on $50,000, that difference adds up to tens of thousands of dollars over the lifetime of a loan.

You do need to own a home for this to work, but, if you’re already looking at a private loan with a high rate, then this is absolutely a comparison worth making.

If you’re holding bitcoin

This next option is for a very specific group of people, but if it applies to you, it’s a genuinely smart thing to know about.

Say you bought bitcoin a few years ago. Tuition is due, so you think, okay, I’ll just sell some and cover the bill.

But here’s the catch: Selling bitcoin could be a taxable event. The IRS treats it like selling a stock, so now you’re just not paying your university, you’re also handing a chunk of your gains to the government, too.

But the Aven Bitcoin Visa Card is a bitcoin-backed line of credit. Instead of selling, you borrow against your holdings. No sale means no taxable event, and the value of your bitcoin stays intact.

It also offers fixed-rate repayment terms of up to 10 years, so you’re not scrambling to cover a huge bill all at once, and it earns 2% cash back on eligible purchases.

So, if you’re a person who’s been holding bitcoin for years, and you don’t want to give up your future gains just to write a tuition check, this is exactly what it was built for.

A few things to keep in mind

A couple things to keep in mind: Using any credit card and carrying a balance long-term for tuition is expensive. Credit cards aren’t built for multi-year repayment the way student loans are.

The Home Equity Card is structurally different, but the point still stands. Be sure to read the terms, know your rate, and make sure it works for your situation.

And one more thing: Some schools that accept credit card payments could charge a convenience fee, so it is worth a quick call to your billing office before you pay.

The bottom line

Most families spend four years carefully choosing a college and then about four minutes figuring out how they’re going to pay for it, but now you know there are more options on the table.

Check to see if you qualify at Aven.com. Terms and conditions apply.