I recently heard that it is allowable to take money out of your 401(k) for the purposes of paying down educational debt. You aren't penalized for this, but you have to pay the money back; you are, essentially, borrowing money from yourself.
However, I later heard that 401(k)'s don't allow this, only IRA's allow this - and that only half of the amount in your IRA can be borrowed to pay off educational debt.
First of all, is all or any of this true?
I'd like to pay down some of educational debt this year. Perhaps it is shortsighted, sure, and I do need to save for retirement. That being said, I am sick and tired of having educational debt hanging over my head.
Secondly, I have a 401(k), through my job, and I don't have an IRA. Could I close the 401(k), roll every penny over into an IRA, and pay down my loans that way?