<p>sorry guys, just reread my previous post…i meant to say lots of good advice in this thread…not lots of good advice in this post…implying my own post! (I am hoping my post is good advice!)</p>
<p>Any and Every one should get someone who knows what s/he is doing go over the whole situation before taking any advice. These boards are just to show some options and suggestions. Not to recommend a course of action. No way any of us get anywhere close to the whole picture from posts or even threads. </p>
<p>There are perils both present, near future, and long term future in going into a 401K. But there are times when it is justified. As one poster here stated, it was the savviest move to make in his situation. Anything else would have cost more. You gotta do the numbers. Add in that penalty for breaking in there, the additional taxes, additional income on FAFSA/PROFILE that will impact next year’s aid, interest charged, vs other options. Sometimes the pitfall is in the timing. In the OP’s case, delaying such a break in for 2 1/2 years can make a difference.</p>
<p>Also, if you call a school and delay a payment or take a payment plan, you can push some of the deadlines If there are late fees, figure them into the cost. Sometimes the school will return them I paid for a semester very late, almost got my kid suspended, but delayed getting the PLUS money till past the last moment for timeliness, got the late fees returned, and saved on the interest I would have had to pay on the PLUS, Also, I was able to squirrel away some more money in that time period.</p>
<p>The OP will owe $20K in August, maybe. Can that be delayed. Well, yes. It’s likely $10K by August. And if turned down by PLUS and student gets additonal Stafford it would be $8K by August. Are there payment plans to bring it down further? We are talking about delaying as much as possible for 2 1/2 years to maximize fin aid before breaking into the 401 K. You can usually delay payments by about 6 months to schools without too much problem. You look for every break and you can find them scrounging. I do not recommend doing this without a clear goal or time in mind because it is not a good quality of life, but in the short term with something in sight, it can be done. Also look at how much money is at stake. It has to be worth it to do this. </p>
<p>There is a lot of one size fits all advice out there. It’s valid but you gotta customize to your particular situation, sometimes your specific micro situation and as you get down to the problem at hand, sometimes the generalities do not serve a person well. But at the same time, you gotta step back, take a breath and look at the big picture. Hopefully the OP does this as we all try to do this with our life problems.</p>
<p>Believe me, I am looking at every angle possible and do not take this decision lightly. I’m sure many people would disagree with my decision however like I stated before, I will have to borrow to pay for my daughter to attend any school so I’m willing to borrow a little more for her to go to the one she feels is the best fit. Experts every where say never withdraw from your 401k but I feel like paying for my daughter’s education is worth it. I’m under 40 and I have time to continue to contribute. I know people out there who are 40 and just getting started with 401k. I have looked into the EFC issue, tax issue, etc so I’m going to take that into consideration in my decision.</p>
<p>I’ll say it again:</p>
<p>$18,400 401k withdrawal to yield $10,000 after taxes and penalties</p>
<p>Wow.</p>
<p>Hey, anyone with a secure pension and 401K money and is under 40 is in great shape in my book. It will work out.</p>
<p>I do agree that plus loans are a better option than paying penalties on a 401K and affecting FA formulas at the same time.</p>
<p>And I say you’re right to go for it when the funds for state school aren’t really there either.</p>
<p>Lots of people live close to the bone during these years. My second is graduating, and I have paid my last tuition payment, but the money situation isn’t really improving. D is in law school, and though she’s paying for it through loans, her understandable queasiness about having huge loans means that we are still providing a subsidy. Sigh. Such is life.</p>
<p>So many different avenues & permutations. I have an appointment next week with a CPA who is supposedly also schooled on IRA withdrawals and estate planning. We will interview each other & decide if the fit is right.</p>
<p>Bottom line is I’m trying to find out if it’s feasible for me to draw money from my IRA to pay PLUS loans that I’ve had to defer because of the monthly nut on our other PLUS loans that I’m currently paying. Remember, they are deferred but unlike the in-school Staffords for the kids that don’t start accruing interest until they’re out of school, these PLUS loans start right now. I’m no accountant, but just for the heck of it I ran some figures & $50K in deferred loans for 5 years at 7.9% magically turns into over $73,000. Hello.</p>
<p>There are a lot of factors to be weighed, some that I’ve probably not even considered, and that’s why I’m consulting a professional. However, I have been told by more than one source that the 10% penalty does NOT apply if an early IRA withdrawal is used specifically for educational expenses, as long as you keep track of them. It’s the early withdrawal as taxed ordinary income that’s a killer. We’ll see. I’ll keep y’all posted.</p>