I went back to school after a few years in industry. The PhD has a stipend, but it doesn't quite go far enough. I'm dipping into savings each month. I'm looking for a little extra cushion. I have a 401k that I can dip into. I realize that comes with a 10% penalty, but my marginal tax rate is so low that the penalty doesn't look that big. Alternatively, I can get a student loan, but rates are ~8%, and for grad students interest starts accruing as soon as the loan is given. I'm probably over two years away from being able to start paying it back. So, what would the better option be? (Or maybe there are better ones out there? e.g 0% intro rate credit card)

  • I thought there were subsidized and unsubsidized student loans. Subsidized loans do not accrue interest while you are in school and up to several months after you leave school. Which kinds of loans do you have?
    – user102008
    Mar 20, 2013 at 22:59
  • 4
    @user102008 Assuming this is US, as of July 2012 you can no longer get a subsidized loan as a graduate student. Mar 21, 2013 at 1:24
  • @Yamikuronue: Thanks for updating me on that. That is kind of a bummer.
    – user102008
    Mar 21, 2013 at 9:09
  • A third option would be to evaluate your spending and lower it to be within the PhD stipend.
    – enderland
    Mar 23, 2013 at 17:36
  • Student loans come with a couple other perks: You can deduct the interest you pay on your taxes, and there may be refinancing etc. options down the line that would reduce your interest rate. There are also loan forgiveness options, depending on your subsequent career choices. Some lenders also will reduce your interest rate a bit if you sign up to autopay each month (e.g. greatlakes does this). Feb 13, 2018 at 19:09

1 Answer 1


The penalty is 10% regardless of the tax. If your marginal rate is so low, I'd consider converting some to Roth each year, and not touching it for tuition.

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