* Home equity. Despite recent increases in home mortgage rates, rates on home equity lines of credit are still extremely low. The average rate on a $10,000 home equity line of credit is 3.94%, according to Bankrate.com. A home equity line of credit allows you to borrow from a revolving line of credit backed by your home equity. Rates fluctuate depending on market conditions.

Another alternative is a home equity loan. In this case, you receive a lump sum that is paid off over a specified term. The rate is typically higher than that for a home equity line of credit but remains fixed for the life of the loan. The average rate for a home equity loan of up to $10,000 is 6.72%, according to Bankrate.com. Interest on home equity lines of credit and home equity loans is usually tax deductible.

Some colleges and universities offer their own versions of home equity loans. Those programs may offer lower costs than conventional home loans, [Kalman Chany] says. For example, the Massachusetts Educational Financing Authority, the financing arm of that state's colleges and universities, gives parents the option of securing existing school loans with their home equity. The option allows parents to deduct interest on their loans, reducing the cost of borrowing. For more information, see www.mefa.org.