Smart Use of 401K???

[qwestlove80]

My wife has approximately $9K in a defaulted student loan and as a result can't get another student loan to go back to nursing school. the creditor is offering to settle the debt for ~$4K if paid by a certain date. we r thinking about using ~$4K from a 401K from an old job to pay off this debt so that she can get back in school and start making some money!!! Should we go ahead and pull this money? I know it will be taxed and penalized. But if she can get the money to pay off the debt and have that settled and out of the way then she can finally get some more loans and get back in school. We don't seem to have many other options. She would like to get into the August class of the nursing school.

[EconoMutt]

Originally Posted by qwestlove80

My wife has approximately $9K in a defaulted student loan and as a result can't get another student loan to go back to nursing school. the creditor is offering to settle the debt for ~$4K if paid by a certain date. we r thinking about using ~$4K from a 401K from an old job to pay off this debt so that she can get back in school and start making some money!!! Should we go ahead and pull this money? I know it will be taxed and penalized. But if she can get the money to pay off the debt and have that settled and out of the way then she can finally get some more loans and get back in school. We don't seem to have many other options. She would like to get into the August class of the nursing school.

Are you sure you will qualify for additional loans if you don't pay the full amount of your current loan off?

[jpg7n16]

I 2nd Econo's question. Will that even work? If it will then....

Personal loan? Take loan from local credit union for 4k, use it to pay off student loan.

Part time job? Make 4k in 2-3 months. Go back to school then.

2nd job you? + 2 job her? = paid off really fast, builds up cash before school starts in August

If they'd settle for 4k today, why wouldn't they settle for 4k in 2-3 months?

Other questions:
Why are you contributing to a 401k if your wife has student loans in default?
How much do you guys make? Are you both already working 40 hrs/week?
Are you on a budget?
How much more schooling does she have to finish before she can get a nursing job?
What other debt do you have?

[Adria.John]

Apart from these questions above, if you have serious needs then why dont you get some payday loans for yourself? Fulfill your urgent needs right now, and continue with existing plan of 401K.

[coach2wealth]

A defaulted student loan will settle later if they'll settle today. I'd sell stuff, deliver pizzas, wait tables and mow lawns for a few months and raise the money. Not only do you pay penalties and taxes, you lose years of tax free growth. You will really miss that money later.

[jpg7n16]

Originally Posted by Adria.John

Apart from these questions above, if you have serious needs then why dont you get some payday loans for yourself? Fulfill your urgent needs right now, and continue with existing plan of 401K.

never never never do payday loans!! cashing out 401k with tax and a 10% penalty > payday loans @350%!!

Please read the following sites - and then never get one!

Payday Loans Equal Very Costly Cash: Consumers Urged to Consider the Alternatives

Fact Sheet On Payday Loans

Payday Loans: Dangerous Consumer Rip-Off

[GrimJack]

Originally Posted by jpg7n16

never never never do payday loans!! cashing out 401k with tax and a 10% penalty > payday loans @350%!!

Please read the following sites - and then never get one!

Payday Loans Equal Very Costly Cash: Consumers Urged to Consider the Alternatives

Fact Sheet On Payday Loans

Payday Loans: Dangerous Consumer Rip-Off

Thanks jpg - I was going to say the same thing Never, never, never use payday loans - go to a pawn shop before payday loans.

[jIM_Ohio]

bad idea
401k is retirement funds, you contributed enough to 401k to earn 9k
now you are turning that 9k into 4k

with decisions like that you will be working until the day you die Put in 100k, turn it into 50k... put in 10k and turn it into 5k... those are the money decisions of Bernie Madoff I think

[fruitbowlk]

1. Never get payday loans
2. Never cash out money from your 401 k plan for something as simple as a defaulted student loan
3 You wife will have to put off going to nursing school until you all can come up with a plan to pay off her current student loan, She may not like it but that what she she needs to do.
4. Come up with a plan to pay off the student loan and anymore classes she may be taken in the future.

[qwestlove80]

Originally Posted by EconoMutt

Are you sure you will qualify for additional loans if you don't pay the full amount of your current loan off?

We would be paying off the full amount of the defaulted loan with the proposed plan. As a result we would qualify for more loans.

[qwestlove80]

Originally Posted by jpg7n16

I 2nd Econo's question. Will that even work? If it will then....

Personal loan? Take loan from local credit union for 4k, use it to pay off student loan.

Part time job? Make 4k in 2-3 months. Go back to school then.

2nd job you? + 2 job her? = paid off really fast, builds up cash before school starts in August

If they'd settle for 4k today, why wouldn't they settle for 4k in 2-3 months?

Other questions:
Why are you contributing to a 401k if your wife has student loans in default?
How much do you guys make? Are you both already working 40 hrs/week?
Are you on a budget?
How much more schooling does she have to finish before she can get a nursing job?
What other debt do you have?

Why should I ever stop contributing to my 401K especially if my company matches?

I work 40hrs/wk an bring in ~$50K/yr gross. My wife works part time on the weekends and brings in ~$10.5K/yr gross. I have a 5yr step son. She shuffles him to and from half day pre-school during the week.

I have spent time to set up a budget but we have not been following this as closely as we should be.

In June, my wife and I will have been married 1 yr. The student loan that is in default is for schooling that was completed a long time ago before we met. She got to the end but could not pass a test that was needed to enter the field. She is currently a state certified nursing assistant. Her earning potential maxes out at about $15/hr. Our plan is for her to attend LPN nursing school (~9 months). After which her earning potential is about $25/hr. She will then fast track(~1yr) to get her Associates and become an RN. The earing potential at this point doesn't change much but she will be much more employable. Ultimately she would like to continue on to get her masters in nursing and become a Nurse Practitioner.

As far as debts go.... I have two student loans in good standing ($4K and $17K). I have two credit cards ($4k @ 13% and 8K @ 20% we are falling behind on paying these CC). $700 in medical debt and my wife's auto loan of $14.5K.

[Adria.John]

Well, i understand payday loans charges heavy interest and have strict rules. But, these are for those who defaults or doesn't pay at time. My friend, look at the other aspect too. It gives quick money and without efforts. We can meet our urgent needs too. I think, we just need to plan our loans before taking it.

[skydivingchic]

You will not find any fans of taking money out of a 401k on this site. The only exception most people here will make is if you are in danger of losing your home or for severe medical issues. Paying off old student loans isn't a smart use of retirement funds in my opinion. You guys have a rather large pile of debt and you are essentially proposing to take out more. You also mention having problems keeping up with the credit cards. My advice would be to get yourselves on a budget, pay off the old student loans and credit cards, and make a large dent in your current student loans and the car. Then talk about sending your wife back to school. I would not recommend stopping 401k contributions to do this. You have to learn to live on less than you earn. Bottom line - DON'T take money out of the 401k.

[jpg7n16]

Originally Posted by qwestlove80

Why should I ever stop contributing to my 401K especially if my company matches?

Because by using the 401k you are deferring cash until later, when you need it now. It'd be much better for you financially to stop the whole 401k, and put the extra cash that generates towards eliminating the credit cards or towards settling on the school loans.

I work 40hrs/wk an bring in ~$50K/yr gross. My wife works part time on the weekends and brings in ~$10.5K/yr gross. I have a 5yr step son. She shuffles him to and from half day pre-school during the week.

Hmmm... well it might be kinda hard to get another part time job then So, no bueno on that idea.

I have spent time to set up a budget but we have not been following this as closely as we should be.

A budget could definitely free you up some more cash each month. You're obviously spending a bit more than you have available in cash each month (as evidenced by the student loans being late, and the credit card debt). It won't solve all your problems, but the extra cash flow could def help.

I'd suggest trying to scale back to living solely off your $50k. Then all of her earnings could go toward paying for school and elimiating other debts you guys have. Once the debts are gone, her income is just gravy and you guys can really start getting ahead!

In June, my wife and I will have been married 1 yr. The student loan that is in default is for schooling that was completed a long time ago before we met. She got to the end but could not pass a test that was needed to enter the field. She is currently a state certified nursing assistant. Her earning potential maxes out at about $15/hr. Our plan is for her to attend LPN nursing school (~9 months). After which her earning potential is about $25/hr. She will then fast track(~1yr) to get her Associates and become an RN. The earing potential at this point doesn't change much but she will be much more employable. Ultimately she would like to continue on to get her masters in nursing and become a Nurse Practitioner.

1st off, congrats

Full time at $15 an hour is about $30k a year ($25/hr is $50k). But having the son at home, that may not be possible to go full time. That's really up to you guys - but I don't think it'd be worth it.

That's a good plan for her I think. It would take the 9 months to up the earning potential, which is a reasonable timeframe. Those added earnings could help offset future education costs, etc.

Are there any loan forgiveness programs available in your area? Some firms will help repay student loans if you work there X number of years. That could be a really good option.

As far as debts go.... I have two student loans in good standing ($4K and $17K). I have two credit cards ($4k @ 13% and 8K @ 20% we are falling behind on paying these CC). $700 in medical debt and my wife's auto loan of $14.5K.

"falling behind" tells me you could use more cash today. Combine cutting the 401k with sticking to a workable budget, and maybe you can start "getting ahead" on these CC's/loans. The debts are killing your monthly cash flows, and the sooner they're gone, the sooner life will let you breathe a bit.

[Stuartthomas]

Originally Posted by Adria.John

Well, i understand payday loans charges heavy interest and have strict rules. But, these are for those who defaults or doesn't pay at time. My friend, look at the other aspect too. It gives quick money and without efforts. We can meet our urgent needs too. I think, we just need to plan our loans before taking it.

i agree with this ...but at the same time i like it to be a short term then the long term..if taken like this ..it wont trap you as most of the people think about it..

[Debt Relief]

LOL Using a Payday Loan to pay off a $4k debt when you can hardly make end's meat is suicidal to say the least. Payday loans are ONLY good for, as the name implies, getting a quick bit of cash that you can pay back on your next "Payday!"... NOT for borrowing money that is going to likely take months if not years to pay back.

Dipping into a 401k is generally NOT a good idea. If you can borrow against it and the interest you pay back gets put back into the 401k then it's sometimes acceptable. But I would NEVER cash in part or all of a 401k to pay a debt.

I would clean toilets, deliver pizza, work 7 days per week, do double shifts, or whatever it took to come up with $4K before I would mess with my 401k or take a payday loan.