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LGB

should I borrow from my 403b?

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Unexpectedly, we need 24000 to pay for a year of post-grad schooling for our child; deferred loans typical for college are not available.  Should we borrow from our 403b?  I'm thinking our existing home equity line is a better option as we are a few years from retirement.  

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Sorry I have no experience with your situation, but I'll give your thread a push. In general I would rank your retirement ahead of your child's post-grad schooling. Is your 403b plan with a low-cost vendor? Are you invested with say at least 50 to 60% in equities, so that your account is growing significantly? By withdrawing 24k, you will slow the account's growth rate won't you? 

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I agree with krow26. Generally, your retirement takes precedence over children's college costs. The home equity line of credit may be a better way to go. 

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You didn’t specifically ask, but I always feel obligated to point this out. My local state university (which I graduated from) charges about $6,300 for a year of graduate school. If you were to get a 4 year (undergrad) computer science degree from them, you’d start off earning 75k or so and you’d max out around 150k (not sure about a graduate degree, probably not much more, maybe 2k). So I encourage everybody to look at the finances behind education and a 24k loan for a year of graduate school seems like a lot.

I’ve never sought to borrow money from my retirement account, but I’ve read that it’s a terrible idea. You’d have to do the research to see how cheaply you could borrow the money from every option available. I suspect this equation also depends on personal information like your credit score and income.

I also want to point out that when I went to school, I was able to get relatively low interest rate loans and I believe some of them didn’t begin charging interest at all until 6 months after I graduated.

I tend to have quite a few socialistic tendencies, but I too believe in the principle that an individual should make sure their retirement is completely secure before they start funding other people’s expenses. This is a value judgement so reasonable people will disagree. 

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2 cents more from someone who has never been in your position, LGB.  

My perception is that the only time one would even consider touching 403b funds (other than as income in retirement) is for a genuine emergency that cannot be addressed another way.  (Maybe taking some out for a house down payment would make sense in some cases.)  Basically, that money should be off-limits before retirement—I'm sure you don't want to have to look to your son for financial support during your retirement years.

Ed is correct that there are some public universities that offer grad degrees for a relatively modest cost and those are worth considering.  I have no idea what field your son is entering, but speaking as someone who has taught in grad programs at several universities, it is often the case that students who have been out of school for a few years are the ones who make the most of graduate training.  Again, I don't know whether this fits your circumstances, but two or three years working (ideally, working in a related field)  could potentially be a good solution: he could save money during that period; possibly he could become independent for tax purposes, increasing his eligibility for financial aid, and he is likely to enter grad school a more mature person with a clearer sense of what he wants to get out of post-graduate training.

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LGB,

Typically, your 403b loan is payable over 5 years (or less) but the interest is going to be the same whether you pay it today or tomorrow- the pay back amount is the same either way. The only advantage of paying it sooner than the term is that it goes into your account that much sooner, working for you. Is your child going to be paying off this "loan" to you upon completion of grad school? If so, that'll make paying off your loan quicker and might help you answer your question.  The origination fee is probably low too.

Other points to consider are that some loans do not allow early payment unless the payment is in the exact amount as the monthly payment - to the penny - and comes from the same bank source, OR unless an extra payment is paying the loan off in full. Check that out before deciding.

That said, the HE loan is already established so you might not have any origination fees but you might not have any low introductory rates either. Unless you got a whole new HE. And the interest is no longer deductible and not paid to you like in the 403b scenario.

Good luck to you and your child.

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