Student Loans

[Mrcliffp]

My son has just under 100K in student loans @ 6.5% for a 15 year term I believe. Recently a second child entered equation which meant home for mom and cash flow tight w/one salary for all the normal reasons. In any event he has a 401K balance over 100K from a previous employer. Can he roll over his 401K somewhere and potentially leverage (without touching balance) against his student loan debt to obtain a better rate than 6.5% and maybe even extend term to improve cash flow? These are unsubsidized loans (non govt backed) & balance of his debt is reasonable. He's also got a home mortgage w/little equity and a credit score 680ish with no BK's, collection accts, etc. Ideas? Thanks!
He's a software engineer who was recruited from Lockheed. This year his salary was bumped to $96K annually. No other source of income. He's covering all debt with about $1500 left over after all budgeted expenses, excluding entertainment, vacation and unexpected expenses. Just very tight. He has an MBA plus a computer science & English 4 yr. degree.

[Fishindude77]

You don't say anything about his job or income. If he's making $500,000 per year, its not that big of a deal. If he's making $70,000, he's probably over his head and needs to change direction before things get worse.

[GrowingTheGreen]

Has he looked at SoFi? A lot of people are getting better rates through them.

[dczech09]

Can he roll over his 401K somewhere and potentially leverage (without touching balance) against his student loan debt to obtain a better rate than 6.5% and maybe even extend term to improve cash flow?

To my knowledge, this is not possible. However, you may want to talk to his lender to be sure.

Usually, you do not even include your 401k as an asset when applying for credit (such as student loans) since this is meant for retirement. Your son's access to his 401k is restricted as this is a qualified retirement asset. Being that this is a PAST employer (meaning your son no longer works for them), your son will not even be able to withdraw or take a loan against the 401k.

Your son should roll-over the 401k money to a Traditional IRA (Roth IRA is the 401k is a Roth). Even after a roll-over, withdrawing money from the IRA is restricted unless it is a Roth. Regardless, I would not do this.

Your son needs to look at his budget and make changes. This may involve cutting some costs. Ultimately, he needs to be a balanced budget and work on getting his income in line with his costs. I understand it may be tough, but it is necessary. The student loans are pretty high, so hopefully his income can support it.

He could look at SoFi or some other student loan refinancing program, but unless his income is high enough, do not expect much success.

Hopefully they can get to a situation where his wife can work again. Having a second source of income could be a game changer.

The reason why things are tight is because he has too much debt. This is why I recommend people avoid mortgages while they are still paying on student loans.

[Jovanny]

Can u share more details about your son's occupation and salary as it will give a clear picture of the situation?