Plan owners of the Solo 401k plan have access to the Solo 401k loan feature, which allows them to borrow money from the plan for any reason. Some plan owners consider borrowing from their Solo 401k loan to pay student debt, but is it a wise decision? Find out more in this Solo 401k Quick Tip video:
Should I use the Solo 401k Loan to Pay Student Debt?
It depends. A Solo 401k loan usually have lower interest rate, therefore you can save on interest payments. When borrowing money from the plan, however, you will be taking that money from investments. So if your investments are earning high returns, it may not be wise to do so. A Solo 401k loan has to be paid back within 5 years. Because of the shorter payback period, you will have to make higher payments. Consider your current financial situation and make sure you can afford to do so in the next 5 years.