Using an IRA to Pay Off Student Loans

0:00 How to use an IRA to pay off student debt

How to use an ira to pay off student debt hey everyone adam bergman here tax attorney and founder of ira financial today’s video we’re going to talk about how you can potentially use your ira to pay off student debt now i know college university in this country is crazy stuff the costs are getting higher and higher each year it’s mind-boggling um just to tell you

You know a personal story i have a friend that i went to law school with and it’s been 25 years since we’ve graduated close he’s still paying off his law school debt so it’s totally bonkers um i grew up in canada i went to a really good university and um it was actually cheaper than uh kindergarten for my kids so um i love this country but the cost of education

Is astronomical so can you use your ira to pay off any of that debt the answer is yes and no so you can unfor you can take a taxable distribution if you’re under 59 and a half anytime right if you have an ira you can take it out anytime you want and use it for any purpose but if you’re under 59 and a half you need to pay tax and a 10 penalty if you’re over 59 and

A half you just have to pay tax now there’s something called hardship distributions which allow you to take money out of your ira for specific hardship requirements and there is a hardship for qualified educational expenses like tuition or books or computers but unfortunately does not apply to loans or interest so the hardship basically allows you to take money

The ira without paying the 10 early distribution penalty still being subject to the tax on the hardship distribution but it doesn’t apply to loans or interest on loans it only applies to the tuition involved in school or books or computers as a qualified educational expense so in sum you can use your ira to pay for student loans but if you’re under 59 and a half

Tax in a 10 penalty if you’re over 59.5 tax if you have a roth then yes you can use the contributions from the roth tax free penalty free any time to pay off student loans but the earnings on the roth ira the the amount that the contributions generated in growth that could be subject to tax and 10 penalty if you pull out before 59 and a half and if you can wait

To 59 and a half then you can pull out all the roth ira funds tax free penalty free but again unfortunately the hardship distribution rules for qualified education expenses do not apply to student loans or interest so you’re stuck with taking a potential taxable pre-tax ira distribution or navigating the qualified roth ira distribution rules

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Using an IRA to Pay Off Student Loans By IRAFinancial