Borrowing against your home is still a good way to pay some of your kid's college bills.

It's not the best way -- federally guaranteed student loans are better -- but it's not the worst way. Private student loans are at the bottom of our list.

"There are lots of funding options. All of them are good for some families but not every one is good for all families," says Dan Wansten, author of Cash for College. "Home equity loans are a solid option for many."

Start by signing up for the funding available in your financial aid package.

Most aid packages include a mixture of grants, scholarships, loans and work-study options. Many colleges require a student to formally accept a financial aid offer by signing the award and sending it back; others don't. If yours does, don't forget this important step.

With the gap you've got left between the financial aid and the actual costs, you're down to the nitty-gritty.

If you've saved some money for college, plan to use one-quarter of that each of the four years you expect your son or daughter to be in college.

Still short?

You'll need to borrow the rest. There are three options:

• Your home equity line of credit.
• A PLUS Loan sponsored by the federal government but available through banks and credit unions.
• A private student loan.

Here are four reasons a HELOC is the best choice for most families:

Reason 1. HELOCs charge the lowest interest rates. Just above 5.5%, according to our most recent survey of major lenders. While these are adjustable-rate loans and can go up, they would have to go up a lot to match the 8.5% currently being charged for PLUS loans. Rates on private student loans are adjustable and based on your credit score. But in the best of cases -- parents with excellent credit cosigning with their kids -- you can expect to pay 8.35%.

Reason 2. The fees are usually lower, too. Most home equity lines of credit have no application fees, though you may have to pay for an appraisal, and no annual fees. Those HELOCs with annual fees usually cost no more than $80 a year. For PLUS loans, a fee of up to 4% is deducted every time a portion of the loan is disbursed to your son or daughter's college. With private student loans, most lenders charge a fixed percentage of the loan amount as a fee, which can range anywhere from zero for borrowers with the highest credit scores to 11% for those with marginal credit scores.

Reason 3. HELOCs are more flexible to repay. They only require you to pay the monthly interest on your outstanding balance. You can repay as much or as little of the balance as you like for up to 10 years. Repayment on PLUS and private student loans is not required while the student is attending school at least half-time, but interest accrues from the minute the loan is taken out. You must start making regular interest and principal payments after your child graduates.

Reason 4. Most parents can deduct the interest on their HELOCs from their income taxes. The major exception is for taxpayers subject to the Alternative Minimum Tax, which only allows them to write off the interest on loans used to buy or improve a home. While the interest on PLUS and private student loans is also deductible, that benefit is subject to more stringent income limits. Parents can only deduct some of the interest if their joint, adjusted gross income exceeds $60,000, and the deduction disappears for families that make more than $75,000.

Of course, you can't use a home equity line of credit for college expenses if you don't have enough equity to borrow against.

That's a problem some parents are facing for the first time this year.

With home prices falling in two out of every three cities, banks are cutting off families that no longer have enough equity in their homes to warrant the credit lines they've been given.

Lenders such as Bank of America, Chase, Washington Mutual and USAA Federal Savings Bank already have frozen 600,000 accounts, making them impossible to use for college bills.

But if your HELOC is still available, take the money and put it to good use.

If you have some equity to borrow against and need a line of credit, use our database to compare the interest rates and terms offered by hundreds of lenders.

By Amy Buttell Crane

Interest.com Contributing Editor

Have a question about your finances? Ask us at editors@interest.com.