With colleges gearing up for a new school year and tuition continually on the rise, turmoil in the mortgage industry could not have come at a worse time for families planning to use home equity to finance higher education costs.

Home equity loans have for years been a viable last resort for parents who have been either unable or unwilling to save for college. A bull market in housing kept prices steadily rising, making banks happy to lend money against the increase in home values.

But this month, as thousands of American families begin paying for college tuition and expenses for the fall semester, the current mortgage crisis stemming from massive defaults in the subprime mortgage market is making it harder to tap a critical source of cash.

National City Bank's home equity unit last week said it no longer would accept applications for home equity loans or refinancings. And while other banks have not publicly stated a deferment on such second mortgages, many have internally tightened their credit policies, creating the same net effect.

"I'm sure there are people out there not able to send their kids to college because of this," said Dr. Susan Wachter, a real estate economist at the University of Pennsylvania's Wharton School of Business. "The home has been used as a piggybank to save and spend. There's an assumption that housing prices do not fall."

A home-equity lending report done by the Consumer Banking Association in 2006 showed the highest concentration of home-equity borrowers was between ages 35 and 64, with an average household income of $88,451. The study also said about 3 percent of all home-equity loans were used for education expenses, which suggests nearly $7 billion of such loans were used last year to pay for higher education costs, based on Source Media's estimate that U.S. lenders bankrolled $228 billion second mortgages in 2006.

"Certainly there are a number of families planning to use home-equity lines of credit and second mortgages to finance college," said Alex Kindler, a CPA with the Downtown accounting firm Horovitz Rudoy & Roteman. "In many cases, those interest costs are tax-deductible, and they had equity in their homes they had planned to use for college. Because of that, those people never put other money aside for college education."

Next Step magazine, based in Rochester, N.Y., a college planning magazine for high school students, did a survey this year that showed that only 12.1 percent of parents had saved more than $25,000 for their children's college costs, and 52.4 percent had saved less than $5,000.

Those parents surveyed said that in order to pay for college, 24.4 percent of them planned to take out home-equity loans, 22.7 percent planned to get a second job, 15.1 percent planned to get a loan and 14.4 percent would go back to work if they were staying home.

"The survey," said Laura Hammonds, publisher and editor-in-chief of Next Step, "was eye-opening to us in many ways -- not only in the lack of liquid savings for college. But also, the parents seemed to be willing to take on the burden of paying for college by taking on second jobs and taking out home-equity loans."

According to the College Board, the average cost of tuition at public four-year colleges in 2006-07 was $5,836. At private four-year colleges, the average cost was $22,218 last year. After factoring in miscellaneous costs such as room and board, those figures rise by thousands more.

Lynnette Khalfani, a former reporter for the Wall Street Journal and CNBC, and author of "Zero Debt" and "Zero Debt for College Grads," said the mortgage crisis could mean the difference between some families sending their kids to college or not, because parents may have assumed they could tap the equity in their homes and did not bother applying for traditional federal student aid.

"The home-equity loan boom has made college more [attainable] at certain levels, especially for families who dreaded filling out the FAFSA [Free Application For Federal Student Aid]," Ms. Khalfani said. "They just drew on their home equity. Now they don't have that option, especially in high-priced real estate areas.

"It's amazing and frankly very scary how strict banks have gotten. Three years ago, anybody with a pulse could tap into their home equity and get a loan for any purpose. Now, banks are very strict even if there are no bad credit issues."

Chris Chaney, a financial consultant and vice president of Green Tree money manager Fort Pitt Capital Group, said that while credit criteria on home-equity loans was tighter, he thought that they were still wise options if families can get them. Home-equity loans usually are tax deductible, and the interest rates are lower than other college-related products.

But after 20 years of advising families on financial matters, he said, there are good reasons to make children underwrite at least some portion of their own schooling.

"As part of the [advising] process, I want kids to take as much ownership as possible for their college costs," Mr. Chaney said. "Otherwise, they have a tendency to treat college as an extension of their high school experience, only with more freedom. I see an enormous difference in how those students approach their education if they have ownership.

"I don't mind putting [children] in a position where they understand they are going to be paying for this," Mr. Chaney said.

Not everyone owns a home. And some people who do may not have any equity to borrow against even if they could find a lender willing to do so.

Rick Vonk, president of Key Educational Resources, the education financing division of Cleveland-based KeyBank, said most schools would allow parents to pay some or all tuition bills through payment plans.

If that's not an option, they can apply for Federal parent PLUS loans.