Is it possible to use your 401k to pay for student loans without taxes and penalties?

Question

Is it possible to use your 401k to pay for student loans without taxes and penalties?

Answer 1

No.

Answer 2

Yes.

If you are an active employee you may be eligible for a loan from your 401k. These are tax/penalty free.

If you are no longer actively employed with the company, you should be eligible to roll your assets into an IRA. When you take the money from the IRA for higher education purposes...you may be exempt from the early withdrawal penalty but not the taxes.

Talk to a tax advisor to see if student loans would qualify as an exemption.

Answer 3

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Answer 4

zao is right in that you can take a loan to do so but then you're trading debt for debt and not paying anything off.  Further, the interest rate is likely higher inside your 401k and the payoff period is quicker so your monthly payments are higher.  Not good.

As for taking distributions or withdrawals to pay it off? No...you will be taxed AND penalized.