401(k) plans. Typically, you can borrow as much as 50% of your vested account balance, up to a maximum of $50,000. The rates are reasonable, there are no credit checks, and essentially you're paying interest to yourself. However, be aware of the pitfalls.

Specifically, if you don't repay your loan within five years, it will be considered a distribution, which means you'll have to pay income taxes on it, and if you're under age 59 1/2, a 10% early-withdrawal penalty. Likewise, if you quit or lose your job, you usually have to repay an outstanding loan soon after your employment ends -- a time when you may be least able to come up with the money.

Furthermore, even a relatively small loan could end up costing you thousands of dollars in foregone retirement benefits. That's because until you repay the loan, the amount you borrowed isn't available to continue its tax-deferred compound growth. And if you don't continue to make new contributions while your loan is outstanding, you'll lose the significant tax breaks, as well as any matching benefits your employer makes. Plus, the interest you pay yourself may not beat the returns your money could have earned, especially, for example, if you had left it invested in a stock fund. Consequently, your child, who has a future of lifetime earnings, may be better off doing the borrowing.

Home-equity loans. If you're a homeowner, another option may be a home-equity loan, which allows you to use the equity in your home as collateral to borrow money. You can borrow a lump sum, which you repay in monthly installments over a set period, or you can borrow money as you need it from an established line of credit, paying interest only on the money you actually use. Interest may be fixed or variable.

Since the interest on the first $100,000 borrowed is generally tax deductible, this is an attractive option. The fact is, however, you're putting your home on the line. So only borrow an amount you're certain you can repay, and get serious about repaying the loan as soon as possible.

Cash-value life insurance policies. Whole life, universal life, and variable life insurance policies allow you to borrow against your built-up cash value, generally at favorable rates. While your loan is outstanding, the policy's death benefit remains in effect. However, it's reduced by the unpaid loan balance. So bear in mind that in the event of your death, your beneficiary will receive a reduced death benefit.

Retirement IRAs. Starting in 1998, when you make withdrawals from either a traditional IRA or the new Roth IRA for qualified higher education expenses, the new tax law waives the 10% penalty tax that is usually imposed when you make withdrawals before age 59 1/2. However, make sure you understand all the consequences before making any moves.

For traditional IRAs, your withdrawals will escape the 10% tax penalty. But you'll still owe ordinary income taxes on any deductible contributions you made and your accumulated earnings. For the new Roth IRAs, you can make withdrawals up to the amount of your original contributions without owing taxes. That's because withdrawals are considered to come from contributions first, then earnings. However, if you withdraw any earnings before you're 59 1/2, and before the account has been open for at least five years, you'll owe income taxes on money that would have eventually been tax-free had you left it invested. And of equal concern, if you pull your money out of your retirement IRA, you won't be able to replace it. So you'll lose out on those future years of tax-advantaged growth on that amount.