Any way to use 401k to help pay for grad school?
mcrevell80 asked:
My husband is starting business school in the fall. I completed his FAFSA and our expected personal contribution is $53k per year (yikes!).
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My husband is starting business school in the fall. I completed his FAFSA and our expected personal contribution is $53k per year (yikes!).
He has a considerable amount saved in his 401k account and since we are both young it might make sense to use that 401k retirement $ towards school expenses.
Is there any way to do this without incurring huge penalties? I know we would pay taxes on the amount in the 401k, but if we are using it for education expenses it seems like there might be some way to use the money without paying the penalty…
Does anyone know of a good way to do this?
January 28th, 2009 at 6:21 pm
depending where you have this 40K.. If it is through an employer, you can and should be able to borrow against it through payroll deductions. You will be given a check and then weekly deductions will be taken out unitl it is paid in full. the interest rate should be low. I have doen this in the past for home purchase
January 29th, 2009 at 3:58 am
There’s different rules for different circumstances.
Here are the basics…scroll about 1/2 way down to withdrawls.
January 30th, 2009 at 3:12 pm
You can borrow against it but there are limitations on that and you also have to pay it back by having it taken out of your check every payday. I don’t think Grad school would be considered a “hardship withdrawal” which is the only other way I know of to take it out without paying the tax penalty.
Personally, I think you’d be better off with a student loan than borrowing on a 401k.
January 31st, 2009 at 7:23 am
way better off iwth student loan…interest rate is lower AND partially deductible. Further, the time period is extended out. A 401k loan is payable in only 5 years. Hefty payments to make while he’s in grad school. At least the student loan payments don’t start until you graduate.
Do not take a distribution from your 401k for this….that 50k that you’ll need will end up costing your retirement account about 500k. AND that’s not including the penalty.