401k loan for education

Can anyone give me some details about borrowing from an existing 401k plan to supplement college education? What penalties and taxes apply etc?

thanks
Tim

Crazydiamond,

Your 401k plan must have the loan feature. Not all 401k plans do have this feature.
There is no tax on a loan from any source, as long as you pay the loan back.
Your maximum loan will be half of your 401k balance.
You must begin making payments immediately.
You pay the loan back with after tax money.
The intrest you pay on the loan will be taxed again when you take qualified distributions.
There is no tax deferred growth on the outstanding loan.

The risk is if you were to separate from your employer while you have an outstanding loan balance. The loan becomes due immediately. Failure to pay the loan balance, that amount would be considered a premature distribution subject to normal income tax and a 10% penalty.

You should seek other methods of paying for the education.

Here is a link that may be helpful:[http://www.savingforcollege.com/].

Thanks Clydewolf--just the information I was looking for.