I took a retirement distribution to pay off student loans.

[Meke]

It says I can't get education tax credit. and I get penalized for early distribution. Is this right?!

[SweetieJean]

Education credits apply when paying tuition and related expenses, not student loans.  However, you can deduct (from income) up to $2,500 of student loan interest paid in a given year. As with many tax rules, there is an income limit to this deduction. Your modified adjusted gross income cannot be more than $80,000 (or $160,000 for married couples filing jointly)

There is no exception to the 10% retirement plan early withdrawal penalty for paying off student loans.