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Yes, it is legal. However, in most cases, the person whom is cashing out or drawing down on the 401K will have to pay early withdrawal fees and taxes. That said, the person that wishes to take this action can request what is called a hardship withdrawal. The hardship withdrawal for educational purposes will waive most of the fees, etc. However, you have to be able to show the hardship...i.e., you cannot pay for your child's college otherwise. You normally have to submit financial statements, an affidavit, etc.
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