Can You Borrow Money From State Teacher's Retirement?

Borrowing from your retirement account can be costly.

Some states allow teachers to borrow from their retirement accounts, while others do not. Those states that offer 401(k) are more likely to allow loans, whereas those with 403(b) are less likely to provide loan options. To determine whether you can borrow money from your retirement account, contact your state retirement system.


States Allowing Teacher Retirement Loans

The New York State Teacher's Retirement System allows teachers to borrow up to 75 percent of their personal contributions and accrued interest. Teachers in West Virginia can borrow up to 50 percent of their personal contributions, but the loan cannot exceed $8,000. Before borrowing from your teacher retirement, make sure you understand how much your monthly payment will be, and be sure you understand the tax implications of your loan.


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States Not Allowing Teaching Reitrement Loans

Many states do not allow teachers to borrow any money from their retirement accounts, regardless of hardship or any other reason. The only way for a teacher to receive their retirement funds is to either quit working for the state or retire. States that do not allow retirement loans include Arkansas, Georgia, Kentucky, Louisiana, Massachusetts, Mississippi and Washington.



Eligibility varies by state, but typically eligibility rules include having worked for the state education system for at least one year. In some cases, you may need to provide a reason for needing the money, such as hardship or the need for down-payment on a new home.



Teacher retirement loans from a 401(k) plan must be repaid with interest over a period of five years. Interest rates vary by state. Typically, loans must be repaid before a teacher can receive any retirement benefits. Loan payments are usually automatically deducted from your teacher paycheck.