Mike Causey

The Loan Rangers Ride Again

The number of federal-postal-military people taking loans from the Thrift Savings Plan is down, even though the number of account holders is way up. Senior Corr...

Federal News Network Staff

June 20, 2008 4:00 am

3 min read

If you are planning to borrow money from your Thrift Savings Plan account, odds are you will do it in June, July, or August. At least that’s when most federal, postal and military investors tap their TSP for a loan. The other big month for TSP loans is April.

Folks who watch the federal 401(k) plan suspect that summertime is the favorite time as civil servants prepare (brace) to pay college tuition in the fall. Makes sense.

So why is April also a popular borrowing month? Think about it! Can you say “income taxes”?

Currently there are about 763,000 outstanding loans among the TSP’s 4 million account holders. That’s a lot, but it is down from 2003 when the TSP customer base was smaller (about 3 million account holders) but there were just over 1 million loans outstanding.

So what happened?

It could be that people are becoming more savvy, realizing that even though they can borrow from their accounts, tuition and purchase of a house are the top reasons, and repay themselves, it still slows the growth of their account. Money that is outside the TSP doesn’t grow until it returns to the account.

Many private sector 401(k) plans don’t allow people to borrow from their accounts. At best they will permit “hardship withdrawals,” but that money is gone forever. It cannot be paid back. Because the TSP is a key component of the total retirement package, Congress requires feds, who can have two loans at a time, to repay them.

Another reason loans are down is that the TSP now charges $50 to process each loan. Also, it no longer allows back-to-back loans. In the past, some people used the TSP loan system to boost the amount of cash they had to spend. Many had two loans going all the time. As soon as one was nearly paid off they would reapply for another. Now the TSP requires a 60 cooling off period between the time a loan is paid off and individuals can reapply for another.

Whatever the reason, fewer people are borrowing from the TSP and that, in the long run, is good news for most of them.

State Department Finalists

Two State Department types, one a foreign service officer, the other a civil servant, are among the finalists for the prestigious Service To America medals. The program is sponsored by the Partnership for Public Service. In addition to the service awards it will also pick someone as Fed of The Year. State’s dynamic duo are FSO Crystal Kaplan, currently a refugee coordinator in Jerusalem and Mary Kate Friedrich who is special advisor to the Under Secretary for Democracy and Global Affairs.

Combat Pay For Civilians

The Office of Personnel Management is urging agencies to take advantage of various special payments that many overseas employees, in combat zones, should be getting. For more on that from FedManager, click here.

Nearly Useless Factoid

The team dentist for the San Francisco Giants lives the dream. His parents must have known when they named him… Les Plack.

To reach me: mcausey@federalnewsradio.com