I am a nontrad student who recently quit my full-time job to return to school. I just remembered that I have some money in my TSP (similar to 401K) and am wondering if I should withdraw these funds to help pay for my degree. It’s not much, maybe around $10k…but I could see it helping a lot. I am in my 20s and I am wondering if this would be a good financial move. Currently not depositing anything in the account so it’s just sitting.
What are some pros and cons to withdrawing my TSP to pay for school expenses? Is it worth it? Consequences in terms of financial aid for future years? I only have about 2 years of school left (this year and next) so I don’t think it’ll affect my FA eligibility/status for next year due to the nature of FAFSA requiring older tax information…but I may be overlooking something and is my reason for asking. If withdrawing is a good idea, is there any way I could avoid paying for tax penalties?
Unfortunately, OP can not borrow from retirement I’d s/he is no longer working for the employer. While OP can take a hardship withdrawal without penalty, you will also have to include it on your FAFSA next year, which may effect your need based aid before you complete your degree.
No, take out student loans if necessary but never touch retirement money to pay for school. The best thing you have is time for the money to grow. You can’t get that back.
@sybbie719 I thought that this year’s tax information (2018 income) would be for the fall 2020 - spring 2021 school year. Hoping to be done by spring 2020. Is there a question on the FAFSA that will ask about this year’s income?
@partyof5 Those were/are still my thoughts about withdrawing these funds. Will be taking out loans but will still need additional funds. Hoping to avoid private loans by withdrawing these funds…which I am assuming makes more sense because the amount of interest I’d need to pay back for the private loan could be higher than what I’ll be earning in TSP interest over the next couple years. Will think about it more before making the decision to withdraw. The early withdrawal penalty is what’s holding me back.
Personally, I don’t think that it is a wise move to quit your job and come out of the work force for two years. What is your anticipated major? There are plenty of people who work full time and attend college. Even as a new grad, it is easier to get a job if you have a job. Some jobs have tuition remission/reimbursement that helps to put ease the financial burden of attending college.
Currently biology unless I transfer to a school that has bioinformatics or statistics (currently looking at schools). Hoping to apply attend med school in a few years.
I considered working full time and doing part time school but several folks I’ve spoken with don’t recommend it
because it would be difficult to complete the necessary extracurriculars for med school while juggling rigorous coursework and work. In addition, after calculating costs myself, it would cost a lot more (thousands) than I would want to pay (over 8 semesters part-time taking a few courses at a time) to continue this way–with living expenses taking a huge chunk.
I won’t be out of work completely, hoping to find a job where I can work about 15 hours a week throughout the school year. Just wondering if I should withdraw the funds considering the tight finances.
I find that a very odd statement for directed to someone who is in their 20’s and is completed a bachelor’s degree.
My son attended college 2 years, then worked full time for 3 years, then returned to college as a full time student. I would have been quite offended if someone had told me that they thought my son should stay in the workforce rather than complete his bachelor’s degree.
Plus the OP has already quit the job, and certainly wasn’t asking anyone’s opinion as to the choice. The only question was concerning the possibility of withdrawing retirement funds.
I am very familiar with what you have written about your children’s path to college over the years.
It is not an odd statement at all given that there are plenty of young people in their 20’s that don’t have the luxury of quitting their job to attend school full time. I was a student in my early 20s who worked full time, while working full time because both my parents died in less than a year of each other when I started college and I had a younger brother.
I will go one further to say that i know plenty of 18 year olds who cannot attend college without working full time because they don’t have the support of their family (even though your son chose his own path, IIRC, you always had his back so he was never really without a safety net if there had been a need) At the end of the day, even full time non self sufficient students still gotta eat and put a roof over their head.
Again, OP has already quit the job. And from another thread the OP earned an associate’s degree at community college, and decided to take work for a year before transferring to complete a pre-med degree. So this is not a situation of someone with a career position quitting their job on whim; this is essentially the end of a gap year.
So OP is simply going forward with the plan that has been in place all along.
Finances are a problem… as they are for many. But that’s a separate issue. OP is asking for advice on a decision that could help with the finances.
The money in your TSP isn’t ‘just sitting there.’ It is a retirement account and growing. Since you quit, you can’t borrow from the accounts but you’d have to withdraw them. There would be a 10% tax penalty and the $10k would be added to your income for the year of withdrawal.
It sounds like the penalties for withdrawal would outweigh the costs of borrowing long-term.
On the other hand, if the goal is med-school, the OP is looking at potentially taking on a huge amount of debt long-term, including for years when it will not be feasible to maintain any sort of outside paid employment, and it may be wise to either avoid any debt that cannot be deferred during the time of school enrollment; or otherwise to plan another working gap year after college & before med school to pay down whatever debt has been incurred. Otherwise, too much debt could be a barrier to entering med school.