I’m doing something a little different in today’s Wednesday Debt Discussion by fielding a reader’s debt-related question. Since many of us are experienced in this arena (that’s nicer to say than “deep in debt”), I thought it would be helpful to let everyone give some input. Here’s the question:
I’m in school for my undergraduate degree. My wife stays home with our two children. We live simply, but I don’t think we’re going to make it through school without needing to borrow some funds. We have some money saved up in a Roth IRA. Do you think it’s better to borrow at +/- 5% for a subsidized loan or pull money out of our Roth IRA? The interest on the loan doesn’t start until I graduate. I believe I can pull contributions from the Roth IRA w/o penalty. Our Roth IRA has given about 7% since inception.
What do you think?
- What advice would you give Jon?
- Should Jon dip into retirement savings to pay for school?
- Would going into debt be a better choice?