Types

• Many types of lines of credit and student loans are available. Homeowners can take out home equity lines of credit, using the home as collateral. Some lenders, especially in Canada, offer student lines of credit that typically require students to make interest payments while in school and then start paying principal and interest after graduation. Federal student loans offered in the United States and elsewhere sometimes provide benefits such as graduated repayment plans and subsidized interest payments while in school. Private lenders such as banks and credit unions also offer student loans.
  
  

Interest Rates

• In most cases, federal student loans will have the lowest interest rates. As of 2009, federal Perkins loans had a 5 percent interest rate, subsidized Stafford loans had a 5.6 percent interest rate, unsubsidized Stafford loans had a 6.8 percent interest rate and PLUS loans had an 8.5 percent interest rate. Private lenders charge much higher interest rates on student loans, sometimes as high as 15 percent or more. A home equity line of credit typically has a variable interest rate that is often comparable to that of a PLUS loan.
  
  

Tax Deductions

• Both student loans and home equity lines of credit provide tax deductions for interest paid. According to the education site www.FinAid.com, as of 2010 taxpayers can deduct up to $2,500 of interest paid on student loans even without itemizing deductions. With a home equity line of credit, most homeowners can take a tax deduction of up to $100,000 of annual interest paid on a mortgage and home equity line of credit if itemized. Other types of lines of credit do not provide tax deductions on interest paid.
  
  

Loan Forgiveness

• Lines of credit and student loans are treated differently in cases of loan forgiveness. Students who end up working in fields such as medicine, teaching, humanitarian work and the military can encounter jobs that offer to pay off all or part of their student loans. Federal and private student loans are typically eligible to be paid off by these programs. However, those paying for education with a home equity line of credit may not be able to reap loan forgiveness benefits.
  
  

Time Frame

• Federal student loans have a repayment term of 10 years, although the term can sometimes be extended to up to 30 years. Most home equity lines of credit have either a balloon payment at the end of the draw period or a short repayment period of 10 to 15 years. Refinancing the mortgage can lengthen the repayment period of a home equity line of credit.
  
  

Risks

• When borrowing money through a home equity line of credit, the lender holds the home as collateral for the loan. Missing payments could result in foreclosure and loss of the home. Student loans, especially those provided by the government, accommodate for financial struggles with features such as income-sensitive repayment plans and deferment due to economic hardship. Defaulting on a student loan results in consequences such as a damaged credit rating and the government garnishing wages and income tax refunds to pay back the loan.