Are you eligible for a TSP loan?
You can borrow from your Thrift Savings Plan account if:
- You have at least $1,000 of your own contributions and associated earnings in your account. Agency contributions (and earnings on that money) cannot be borrowed.
- You are currently employed as a federal civilian employee or member of the uniformed services. (Separated or retired participants cannot obtain a TSP loan.)
- You are in pay status. For civilian TSP participants, non-pay status includes leave without pay and furlough.
- You have not had a taxable distribution on a TSP loan within the past 12 months, unless the taxable distribution resulted from your separation from Federal service.
- You can borrow from your Thrift Savings Plan account even if you have stopped contributing your own money.
- You can only have one outstanding general purpose loan and one outstanding residential loan from any one TSP account at a time.
- You have not repaid a TSP loan of the same type in full within the past 60 days. (If you have both a civilian TSP account and a uniformed services TSP account, the 60-day waiting period applies separately to each account.)
- You must not have a court order against your TSP account.
How Much Can You Borrow with a TSP Loan?
You can borrow your own contributions and earnings on your own contributions in the Thrift Savings Plan account from which you intend to borrow, not including any outstanding loan balance up to $50,000, minus your highest outstanding loan balance, if any, during the last 12 months. Even if the loan is currently paid in full, it will still be considered in the calculation if it was open at any time during the last 12 months.
For example, if you took out a loan for $35,000, then paid the loan back in full seven months ago, the maximum loan amount you would be eligible to borrow would remain $15,000 ($50,000 minus $35,000, the highest outstanding balance during the last 12 months) even though the money has been returned to your account.
If you have both a civilian account and a uniformed services account, the combined account balances and outstanding loan amounts will be used to calculate the maximum TSP loan amount.
The easy way to see how much you can borrow is to log into your account at www.tsp.gov and click on TSP Loans under Online Transactions. The website will immediately display the current interest rate and the amount of the loan which is available to you. You can also call the ThriftLine at 877-968-3778.
How long can you take to pay off a TSP loan?
The Thrift Savings Plan issues two types of loans: (1) general purpose loans which don’t require documentation and must be repaid within five years, and (2) loans for a personal residence (TSP home loans), which require documentation and which you can take up to 15 years to repay. You have to start paying off both types of loans within 60 days of borrowing the money.
I don’t believe that there is any scenario under which you should be stealing from your retirement for more than five years (and considerably less than that except in extraordinary circumstances), so I do not address the use of the more cumbersome personal residence TSP home loan in this guide.
What Fees are Charged for a TSP Loan?
You will pay a fee of $50 per loan, which will be subtracted from the total borrowed amount. For example, if you want to borrow $10,000 from your Thrift Savings Plan, you will receive a check for $9,950. While this fee is very small compared to that charged for many other types of loans, note that a $50 on a one year, $1000 loan results in an effective fee of 5%, so it is not generally cost effective for small loans.
What Will the Interest Rate be on a TSP Loan?
The interest rate you will pay for the life of the loan will be the same as the rate paid by the TSP G Fund on the date of your loan. This rate has averaged about 1.77 percent above the three-month Treasury bill rate. This means you are paying a very modest premium over short-term treasury bond rates to take out a medium to long-term (five to fifteen years) loan. Because you are paying this “interest” to yourself and effectively just contributing to your savings, you are in many respects receiving an interest free loan.
How much will be Deducted from Each Paycheck?
If you want to calculate your expected loan payment on a TSP loan, you can use the TSP.gov online calculator.
What if I’m married or divorced?
Your spouse has rights to a portion of your Thrift Savings Plan account and a former spouse might have rights as well. The FERS program requires written spousal consent, but the Civil Service Retirement System (CSRS) only requires you to notify your spouse of the loan. If you have exceptional circumstances (such as not knowing where your spouse is), you can apply for an exception to that requirement. If you are divorced or legally separated and the court settlement awards your spouse/former spouse a portion of your TSP holdings, or places a hold against your account for child support or alimony, you might be ineligible for a loan.
How to Apply for a TSP Loan
The simplest way to apply for a Thrift Savings Plan loan is electronically, at www.tsp.gov. To access the TSP loan application, log into the My Account section and select “TSP Loan”. Depending upon your retirement system coverage (FERS, CSRS, or uniformed services), marital status, type of TSP loan, and how you want to receive the loan payment (by check or direct deposit), you will either be able to complete the TSP loan application process online, or you will be instructed to print out the partially completed TSP Loan Agreement, complete the form, and mail or fax it to the TSP (with any additional required information). The TSP must receive the TSP Loan Agreement before the expiration date at the top of the agreement.
For more information on TSP Loans:
The Thrift Savings Plan has an excellent booklet which goes into greater detail on several less common issues which you can view here:
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