‘Our oldest child is now in college, but we’re still paying our own student loans.’ We took out $55K in student loans, and 22 years later, we’re still paying and the balance has not budged. What should we do?

Question: I graduated in 2000 with about $35K in student loan debt.  My wife also had about $20K in student loan debt.  They were mostly federal loans with a small amount of private loans.  We were struggling right out of school (she’s a teacher) and couldn’t afford payment so we were told by loan advisors (private lenders) to consolidate with a private lender and that would be the best way to pay them off.  We had to defer payment for a couple of years and then started paying. Obviously interest accrued, which we understood.

But, here we are now, 22 years later, with our loan having been sold two or three times amongst lenders, our payment about $100 more a month, with the same outstanding balance than what we started at. We are making our minimum payments each month. Now our oldest child is in college and we’re still paying for our own student loans.  I have two questions.  1) Is there any hope for private loans that were formerly federal where we were led to believe this was a good option? 2) Should I just pay this off with my 401(k) and take the hit to get rid of this debt?  I’ve got about 20 years until retirement. I’d love to know if my plan to use my 401(k) has some support amongst advisors.

Answer:  In answer to your first question, “once a federal loan is refinanced into a private student loan, there is no going back,” says Mark Kantrowitz, student loan expert and author of Who Graduates From College? Who Doesn’t?. What he means is that you can’t convert private loans back into federal loans, and private loans don’t have the same perks that federal loans do. “Refinancing federal loans into a private loan causes you to lose the superior repayment benefits of federal loans, such as longer deferments and forbearances, income-driven repayment plans, loan forgiveness options and various discharges,” he explains. But since your loans are already private, and the interest rate is pretty high, refinancing may be a good option for you (see the lowest refinancing rates you may qualify for here). “Refinancing rates for good credit are certainly lower than they were 10, even 5 years ago. You may be able to pay the loans off faster with a lower rate,” says Anna Helhoski, student loan expert at NerdWallet. 

Have a question about getting out of student loan or other debt? Email chill@marketwatch.com.

In answer to your second question, pros say to avoid using your 401(k) to pay off your student loans as the early withdrawal could cost you big in terms of taxes and penalties. If you’re under age 59-and-a-half, you might automatically lose, say, 20% of your 401(k) withdrawal to taxes in addition to a 10% penalty from the IRS for early withdrawal when you file your tax return. A 401(k) loan could be risky too: “If you borrow the money from the 401(k) instead of taking a distribution, the 401(k) loan must be repaid within five years — earlier if you switch employers — and you might not be able to make new contributions or qualify for the employer match on contributions until the loan is paid off,” says Kantrowitz.

That all, unfortunately, may leave you stuck with your student loan bill. Pros say to tackle it quickly. Work on getting the lowest interest rates and best terms you can for your private loans (see the lowest refinancing rates you may qualify for here). “The more you pay each month, the quicker you pay off the debt and the less interest you’ll pay over the life of the loan,” says Kantrowitz. “If the loans have different interest rates, try to target the loan with the highest interest rate for quicker repayment as that will save you the most money,” says Kantrowitz, though, of course, always pay the minimums on all debt.