Hardship for Student Loan

[Guest mrskelly2u]

The hardship safe harbor definition clearly allows a distribution for education, but what about to pay down student loans? Does anyone have any experience with this? Would the plan have to abandon the safe harbor and specifically allow for this?

[RCK]

All I can provide is anecdotal information. Our plans would not allow a hardship to repay a student loan. The safe harbor definition says "payment of tuition and related fees"--not repayment of a loan taken out to pay the same.

And I'd argue that the fact that the participant got a loan to pay the tuition clearly shows that there is not a heavy and immediate need.

If you want to make (and stretch) an analogy, allowing a hardship to repay a loan should then also apply to a mortgage for a primary residence. You would not allow a loan to repay a home mortgage (barring a eviction), so should not allow one here.

[Jon Chambers]

This is not a safe harbor HSWD. Plan may not need to be amended if it permits both safe harbor and "facts and circumstances" hardships. But I don't see why paying down loans constitutes a hardship.