The TSP has made three changes to the loan program, effective July 1, 2004:

• A $50 fee is deducted from the amount of each new loan. 
• You may no longer have two general purpose loans at the same time.  (You may have one general purpose loan and one residential loan.)
• When you pay off a TSP loan, you are not eligible to apply for another loan of the same type for 60 days.

Below are answers to many of the questions participants have about these changes.  You can scroll down to view all the questions and answers, or you can go to a particular section by clicking on the links below.

$50 Fee

Why did the TSP make these changes to the loan program?

We made these changes to the loan program to remind participants that borrowing from the TSP should be a last resort.

In the last few years, there has been a substantial increase in the number of TSP loans, and some participants constantly have two loans outstanding, taking another loan immediately after one is paid in full.

The administrative burden and cost of processing loans are significant.  In addition, administrative expenses for the loan program were previously charged to all TSP participants, whether or not they ever used the loan program.  The one-time $50 fee covers the cost of processing and servicing the loan and ensures that these costs are paid by the 640,000 participants who use the TSP loan program, and not by the 2.7 million participants who do not.

I received my loan agreement before July 1, but my loan wasn't issued until after June 30. Will I have to pay the loan fee?

Yes.  You will have to pay the fee on any loan disbursed on or after July 1. 

How does the TSP use the money from the fees?

The loan fees are used to pay the administrative expenses of processing and servicing your loan.

How did you decide on the amount of the loan fee?

The $50 loan fee was determined by considering the cost of administering the loan program relative to the total TSP administrative expenses.  We considered costs such as those for the maintenance of the record keeping system, the processing of loan requests and payments and loan-associated Web and ThriftLine transactions and inquiries, and calls to the TSP Service Office.

How is the $50 loan fee collected?

The one-time loan fee is deducted from the proceeds of your loan.  For example, if your loan is for $2,000, we deduct $50 and you receive $1,950.  As you make your scheduled loan payments, you are restoring the amount of the fee to your account.

How is the $50 loan fee be taken out of my account?

The fee is taken directly out of the loan proceeds.  It is not deducted from your account as a separate transaction or included as an item on your TSP participant statement.

Can I submit the $50 loan fee with my loan request?

No.  The loan fee is deducted from the proceeds of the loan.  You cannot pay the loan fee in any other way.

Is the $50 loan fee part of the finance charge?

No.  The $50 loan fee is part of the loan principal.  For example, when you take a loan for $2,000, the fee is deducted from the proceeds and you receive a check or EFT payment for $1,950.

Do I pay interest on the $50 fee?

Yes, you pay interest on the fee because the finance charge is calculated on the principal amount of the loan.  If you take a loan for $2,000, you receive $1,950 but the finance charge is calculated on the principal amount ($2,000).

Can I claim the $50 loan fee as a deduction on my Federal income taxes?

No.  IRS rules do not allow you to claim this fee as a deduction.

Only One Loan of Each Type

I have two outstanding general purpose loans.  Are they affected by the change?

No.  Your outstanding loans are not affected by these changes.  However, before you can be eligible for a new general purpose loan, you must repay both of your existing general purpose loans.

I took a general purpose loan when I bought my home.  Can I now change that loan to a residential loan so that I can get another general purpose loan?

No.

60-Day Wait to Reapply

After my loan is repaid, how soon can I apply for a new loan?

You must wait 60 days from the time your loan is paid in full until you are eligible to apply for another loan of the same type.

What happens to my loan request if I apply for a new loan before the 60-day waiting period expires?

The TSP Web site will not accept the request for the same type of loan.  Paper loan applications will be rejected.  The TSP will not hold loan applications received during the waiting period.

When does the 60-day waiting period begin?

The 60-day waiting period begins when the TSP posts the final payment of your previous loan.  For example, if we receive a prepayment on July 10 and post it to your account on July 23, the 60-day waiting period will begin on July 24.  The 60-day period is based on calendar days.

Does the 60-day waiting period apply to both residential and general purpose loans?

Yes. There is a 60-day waiting period for each type of loan.  However, if you have only a general purpose loan, there is no waiting period for a residential loan, and vice versa.

If I have only a residential loan outstanding and I pay it off, do I have to wait 60 days before I can apply for a general purpose loan?

No. The 60-day wait applies only to the same type of loan.  You would not have to wait 60 days unless you were applying for another residential loan.

If I pay off a loan from my uniformed services account, must I wait 60 days before I am eligible for a loan from my civilian account (or vice versa)?

No. The rules apply separately to each account.

What if I have an emergency and cannot wait the 60 days to apply for another loan?

There are no exceptions to the 60-day waiting period.

In an emergency, can I get a second general purpose loan?

There are no exceptions to the rule that you can have only one general purpose loan at a time.

Will you notify me when the 60 days have passed and I am again eligible to apply for a new loan? 

No.  When your loan is paid in full, the TSP will send you a confirmation notice.  You should use the date of this notice to determine when your 60-day waiting period expires.

If I apply for a new loan before the waiting period expires, can you hold my loan application?

No. Loan applications are processed in the order they are received.  If you are not eligible at that time, your loan application will be rejected.

Does the 60-day waiting period also apply to loans that are closed as a result of a taxable distribution?

No, a different rule applies.  If your loan has been declared a taxable distribution for reasons other than separation from service, you are not eligible for a new loan for a period of 12 months from the date of the loan taxable distribution.  This rule is not being changed.

If a loan is issued to me but I change my mind and pay it off immediately, do I still have to wait 60 days to apply for a new loan?

Yes.  In addition, that loan may affect the amount you are eligible to borrow, because IRS rules limit the maximum loan amount to $50,000 minus your highest outstanding loan balance within the past year. 

Other Related Questions

Do these new rules apply to both uniformed service members and civilian participants?

Yes.

TSP rules state that the smallest amount I can borrow is $1,000.  If $1,000 is the most that I am eligible to borrow and the loan fee of $50 is deducted from that amount, am I still eligible for a loan?

Yes. The minimum loan amount remains $1,000.  However, because the loan fee is deducted from the loan proceeds, you will receive $950.

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