In part one of this blog, we explored some of the reasons why using a 401k/403b loan to pay for college can be a risky strategy. In part two, we will talk about some of the additional challenges of that strategy and some alternative options.
The Five Year Repayment Period and Paying for College
The main benefit of borrowing is that the borrower can reduce the individual payment amounts by making more payments over time. People who borrow do so because either they do not earn income fast enough or do not have enough money left after they pay their other bills to meet the expense with current income. The five year repayment period on a 401k/403b loan is short for a loan, and these loans do not significantly reduce the size of the payments the borrower needs to make.