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Yes, that is one of the reasons that you could default. Generally, the other reason would be that you voluntarily left your job and didn't pay the money back within 30-60-90 days (or whatever your plan required).

Which is why I'm glad a lot of my money is in a 403b instead of a 401k. TIAA-CREF, at least, doesn't require the money to be paid back when you leave a job. And you can initiate a new loan after leaving the job.

I don't do loans against the 403b lightly (I wouldn't be using it for vacations or buying a new car) but it's handing to have that option in case of emergency.

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