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Student Loans
Posted on 4/21/24 at 1:02 pm
Posted on 4/21/24 at 1:02 pm
My daughter is graduating in May 2024 should I take money from my 401k to pay off her student loans ~ 50k? We have been paying on it but the interest rate on her loan is about 8%. Im no financial guy but my wife and I have worked hard the past 30 years and we don’t won’t to keep paying these monthly loan notes because basically we’re just paying the interest not the principal.
Any guidance or recommendations would be greatly appreciated.
Any guidance or recommendations would be greatly appreciated.
22
Posted on 4/21/24 at 1:04 pm to Abundy007
If you aren’t 59.5, you’ll pay 10% penalty (worse than your interest rate) and your highest marginal rate to get the money. Almost never a good idea.
Posted on 4/21/24 at 1:12 pm to Dawgfanman
It’s her student loans not yours. Don’t wager your retirement for anything
Posted on 4/21/24 at 1:12 pm to Dawgfanman
I’m 56 will be 57 in September thank you for replying. Can you refinance your student loans? Or can you do a hardship loan from your 401k? I’m just trying to either pay her loan off of get a lower interest rate on her student loan.
Thank you
Thank you
Posted on 4/21/24 at 1:15 pm to Abundy007
quote:
I’m 56 will be 57 in September thank you for replying. Can you refinance your student loans? Or can you do a hardship loan from your 401k? I’m just trying to either pay her loan off of get a lower interest rate on her student loan.
Are they in your name? You are close to retirement, let her pay them. She’s got the rest of her life and 50k isn’t that bad.
Just my opinion. I don’t know the answer to your other questions.
This post was edited on 4/21/24 at 1:16 pm
Posted on 4/21/24 at 1:44 pm to Abundy007
Would suck for you to take out a loan on your 401k to pay it off and then student loans get forgiven but you are stuck with your 401k loan….
Posted on 4/21/24 at 2:47 pm to Abundy007
There are lots of details that go with your question. How well is your 401k funded? Was it your arrangement to pay the loans for your daughter? What kind of a loan is it (who’s it with, does it qualify for anything, etc)?
IMO I would not do a withdrawal.
A 401k loan would get you a lower % and you would be paying yourself that interest but you would have to pay loan back in a shorter period of time (IIRC 5 years).
We did it for my GF after her divorce bc interest payments for her personal debt were $1500 month. I can’t say borrowing from 401k is the best but it worked for us.
IMO I would not do a withdrawal.
A 401k loan would get you a lower % and you would be paying yourself that interest but you would have to pay loan back in a shorter period of time (IIRC 5 years).
We did it for my GF after her divorce bc interest payments for her personal debt were $1500 month. I can’t say borrowing from 401k is the best but it worked for us.
This post was edited on 4/21/24 at 2:51 pm
Posted on 4/21/24 at 3:28 pm to Abundy007
quote:
Im no financial guy
That part is clear, keep your money. She can do the SAVE program and have low payments, will go to 5% of her income in July. .. and be forgiven if she pays long enough
quote:
One of the greatest benefits for borrowers on the SAVE Plan is the government interest subsidy. On the SAVE Plan, if you pay what you owe each month, your loans won’t grow due to unpaid interest. This is because any accrued interest not covered by your monthly payment won’t be added to your principal balance.
Under other IDR plans, you may see your loan balance grow due to unpaid interest. With the SAVE Plan, any remaining accrued interest will be covered by the government, so your principal balance won’t increase.
This post was edited on 4/21/24 at 11:09 pm
Posted on 4/21/24 at 3:49 pm to Abundy007
Do not take early withdrawal. A 401k loan is a better sub optimal solution.
Is it a federal ot private loan? Is it her loan or in your name (parent plus?)
Is your retirement well funded? If not, concentrate on that. Of anything, wait until you retire and pay it off without penalties perhaps spread out the wothdrwal over couple or more years to optimize tax brackets.
If you leave your employer you can take 401k withdrawal with no penalty using Rule of 55 no need to wait until 59.5 FYI.
Is it a federal ot private loan? Is it her loan or in your name (parent plus?)
Is your retirement well funded? If not, concentrate on that. Of anything, wait until you retire and pay it off without penalties perhaps spread out the wothdrwal over couple or more years to optimize tax brackets.
If you leave your employer you can take 401k withdrawal with no penalty using Rule of 55 no need to wait until 59.5 FYI.
This post was edited on 4/21/24 at 3:52 pm
Posted on 4/21/24 at 4:32 pm to Abundy007
50k is nothing. She can handle it for a bit and you can give her a late graduation present when you turn 60 if you want.
This post was edited on 4/21/24 at 4:32 pm
Posted on 4/21/24 at 4:36 pm to Abundy007
I paid 8% and 9% for my student loans 40 years ago. I had a little more than a fourth as much debt as your daughter does. I am about the same age as you. I got mine paid off in about seven years. I also kept them as three separate loans, so I paid off the smallest one first then concentrated on the next one.
Let her pay them off. It's fine if you want to help, but make sure she feels a little discomfort, not pain, but discomfort from the debt, so that she will properly learn to avoid debt in the future. Help is paying a few payments for her each year. If you pay it all off she learns nothing. It's way better for her to learn how hard it can be to keep making those payments.
Let her pay them off. It's fine if you want to help, but make sure she feels a little discomfort, not pain, but discomfort from the debt, so that she will properly learn to avoid debt in the future. Help is paying a few payments for her each year. If you pay it all off she learns nothing. It's way better for her to learn how hard it can be to keep making those payments.
Posted on 4/21/24 at 4:46 pm to Abundy007
Believe I would wait until this WH and DofE finish their multi-never ending forgiveness programs.
That said, we paid the balance due on 2 of our 3 children many years ago....did not wish to retire with that debt - have something catastrophic and give the SSA reason to garnish a penny. Our amount was less than you have quoted and did not have to use retirement monies.
Our son attended a private-for profit - determined to be disreputable but we were not reimbursed as the loans were not deemed as 'direct federal education loans' - they were offed to a Servicer, Navient, and deemed different.
Still irritating but lessons learned and passed to the children.
That said, we paid the balance due on 2 of our 3 children many years ago....did not wish to retire with that debt - have something catastrophic and give the SSA reason to garnish a penny. Our amount was less than you have quoted and did not have to use retirement monies.
Our son attended a private-for profit - determined to be disreputable but we were not reimbursed as the loans were not deemed as 'direct federal education loans' - they were offed to a Servicer, Navient, and deemed different.
Still irritating but lessons learned and passed to the children.
Posted on 4/21/24 at 6:20 pm to Abundy007
If she goes into public service then she can get loan forgiveness after 10 years of payments.
Posted on 4/21/24 at 8:01 pm to Abundy007
quote:
should I take money from my 401k to pay off her student loans ~ 50k?
no
Posted on 4/22/24 at 12:50 am to Abundy007
It's her loan so she should be taking responsibility for it not you. If you want to help her pay it off that's fine but taking out of your retirement to pay her loan is completely insane
This post was edited on 4/22/24 at 12:52 am
Posted on 4/22/24 at 6:46 am to Abundy007
quote:
My daughter is graduating in May 2024 should I take money from my 401k to pay off her student loans ~ 50k? We have been paying on it but the interest rate on her loan is about 8%. Im no financial guy but my wife and I have worked hard the past 30 years and we don’t won’t to keep paying these monthly loan notes because basically we’re just paying the interest not the principal. Any guidance or recommendations would be greatly appreciated.
Do not pay off her loan. It’s her responsibility. Get a fee only financial advisor as it’s clear you need help preparing a financial plan.
Posted on 4/22/24 at 8:32 am to Abundy007
quote:
My daughter is graduating in May 2024 should I take money from my 401k to pay off her student loans ~ 50k? We have been paying on it but the interest rate on her loan is about 8%. Im no financial guy but my wife and I have worked hard the past 30 years and we don’t won’t to keep paying these monthly loan notes because basically we’re just paying the interest not the principal. Any guidance or recommendations would be greatly appreciated.
Your typical parent in American society these days
Posted on 4/22/24 at 8:37 am to kc8876
quote:
Your typical parent in American society these days
Sad, OP should be ashamed for even thinking about this. Hopefully just a troll
Posted on 4/22/24 at 9:09 am to tigerbacon
quote:
It’s her student loans not yours. Don’t wager your retirement for anything
Good advice: "Focus on your own financial goals"
Great advice: "What if this IS one of your financial goals?"
If the latter is the case, the OP should look into a 401k loan, or have her make minimum payments until he can withdraw penalty free. (Unless there's a provision to waive the penalty if it's for educational expenses - that would be a question for a tax attorney.)
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