While it is only a proposed bill and it would need to be approved by both the House and Senate before passing, Sen. Rand Paul (R-KY) is proposing in the Higher Education Loan Payment and Enhanced Retirement (HELPER) Act to allow for distributions from IRAs and qualified plans such as solo 401k plans to pay for qualified education expenses or student loan repayment.
Here is what the HELPER ACT would do:
- Allow Americans to annually take up to $5,250 from a 401(k) such as a solo 401k or IRA — tax and penalty free — to pay for college or pay back student loans. These funds could also be used to pay tuition and expenses for a spouse or dependent.
- Enable two parents and a child, for example, to put over $15,000 in pre-tax funds in one year toward tuition or loan repayment if each set aside the maximum.
- Offer workers the choice to have an employer contribution to a 401(k) count as a Roth contribution.
- Repeal the current-law cap and phase-out of the student loan interest income tax deduction